FFIEC 051

CALL REPORT

INSTRUCTION BOOK UPDATE

JUNE 2020

IMPORTANT NOTE The June 2020 Call Report Instruction Book Update excludes updates pertaining to interim final rules (IFRs) and a final rule published by one or all of the banking agencies from March through June 2020 as well as Section 4013 of the 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which provides optional temporary relief from accounting for eligible loan modifications as troubled debt restructurings. The IFRs and final rule revise certain aspects of the agencies’ regulatory capital rule, amend the Federal Reserve Board’s (Board) Regulation D on reserve requirements, except certain insider loans from the Board’s Regulation O, and modify the Federal Deposit Insurance Corporation’s (FDIC) deposit insurance assessment rules. The agencies have received approvals from the U.S. Office of Management and Budget to implement changes to the Call Report arising from these interim final rules, the final rule, and Section 4013 of the CARES Act. Instructions for these Call Report changes are provided in the separate standalone June 2020 COVID-19 Related Supplemental Instructions (Call Report), which were attached to the agencies’ Financial Institution Letter for the Consolidated Reports of Condition and Income for Second Quarter 2020 and are available on the FFIEC Reporting Forms webpages for the Call Report and the FDIC Bank Financial Reports webpage. The June 2020 COVID-19 Related Supplemental Instructions (Call Report) include instructions for this quarter’s new Call Report items in Schedule RC-C, Part I, Loans and Leases, on eligible loan modifications under Section 4013 and Schedule RC-M, Memoranda, on U.S. Small Business Administration Paycheck Protection Program (PPP) loans, borrowings under the Federal Reserve’s PPP Liquidity Facility, and holdings of assets purchased under the Federal Reserve’s Money Market Mutual Fund Liquidity Facility. The FFIEC 051 Call Report instruction book will be updated to incorporate relevant information from the June 2020 COVID-19 Related Supplemental Instructions (Call Report) after the agencies have completed the standard Paperwork Reduction Act process for these Call Report revisions.

FILING INSTRUCTIONS

NOTE: This update for the instruction book for the FFIEC 051 Call Report is designed for two-sided (duplex) printing. The pages listed in the column below headed “Remove Pages” are no longer needed in the Instructions for Preparation of Consolidated Reports of Condition and Income for a Bank with Domestic Offices Only and Total Assets Less than $5 Billion (FFIEC 051) and should be removed and discarded. The pages listed in the column headed “Insert Pages” are included in this instruction book update and should be filed promptly in your instruction book for the FFIEC 051 Call Report.

Remove Pages Insert Pages Cover Page (3-20) Cover Page (6-20) 1 – 2 (3-20) 1 – 2 (6-20) 13 – 14 (9-19) 13 – 14 (6-20) RC-1 – RC-2 (6-18) RC-1 – RC-2 (6-20) RC-4a – RC-4b (3-19) RC-4a – RC-4b (6-20) RC-7 – RC-8 (3-19) RC-7 – RC-8 (6-20) RC-O-3 – RC-O-4 (3-18) RC-O-3 – RC-O-4 (6-20) RC-R-1 – RC-R-4 (3-20) RC-R-1 – RC-R-4 (6-20) RC-R-7 – RC-R-8 (3-20) RC-R-7 – RC-R-8 (6-20) RC-R-17 – RC-R-22 (3-20) RC-R-17 – RC-R-22 (6-20) RC-R-25 – RC-R-28 (3-20) RC-R-25 – RC-R-28 (6-20) RC-R-31 – RC-R-32 (3-20) RC-R-31 – RC-R-32 (6-20) RC-R-35 – RC-R-40 (3-17, 3-20) RC-R-35 – RC-R-40 (6-20) RC-R-43 – RC-R-44 (3-20) RC-R-43 – RC-R-44 (6-20) RC-R-47 – RC-R-48 (3-17) RC-R-47 – RC-R-48 (6-20) RC-R-57 – RC-R-64 (3-18, 3-20) RC-R-57 – RC-R-64 (6-20) RC-R-67 – RC-R-72 (3-19, 3-20) RC-R-67 – RC-R-72 (6-20) RC-R-77 – RC-R-80 (3-20) RC-R-77 – RC-R-80 (6-20) RC-R-93 – RC-R-98 (3-17, 9-17) RC-R-93 – RC-R-98 (6-20) RC-R-103 – RC-R-108 (3-20) RC-R-103 – RC-R-108 (6-20) RC-R-111 – RC-R-114 (3-20) RC-R-111 – RC-R-114 (6-20) SU-5 – SU-6 (3-20) SU-5 – SU-6 (6-20) SU-19 (3-17) SU-17 (6-20) A-4a – A-4b (3-20) A-4a – A-4b (6-20) A-88c (3-20) A-88c (6-20) A-97 – A-98 (9-18) A-97 – A-98 (6-20)

(6-20)

Instructions for Preparation of

Consolidated Reports of Condition and Income

for a Bank with Domestic Offices Only and

Total Assets Less than $5 Billion

FFIEC 051

Updated June 2020

This page intentionally left blank.

FFIEC 051 GENERAL INSTRUCTIONS

FFIEC 051 1 GENERAL INSTRUCTIONS (6-20)

GENERAL INSTRUCTIONS Schedules RC and RC-B through RC-T constitute the FFIEC 051 version of the Consolidated Report of Condition and its supporting schedules. Schedules RI and RI-A through RI-E constitute the Consolidated Report of Income and its supporting schedules. Schedule SU – Supplemental Information collects additional information in the FFIEC 051 on certain complex or specialized activities in which an institution may engage. The Consolidated Reports of Condition and Income are commonly referred to as the Call Report. For purposes of these General Instructions, the Financial Accounting Standards Board (FASB) Accounting Standards Codification is referred to as the “ASC.” Unless the context indicates otherwise, the term “bank” in the Call Report instructions refers to both banks and savings associations. WHO MUST REPORT ON WHAT FORMS Every national bank, state member bank, insured state nonmember bank, and savings association is required to file a consolidated Call Report normally as of the close of business on the last calendar day of each calendar quarter, i.e., the report date. The specific reporting requirements for a bank depend upon the size of the bank, whether it has any "foreign" offices, and the capital standards applicable to the bank. Banks must file the appropriate report form as described below: (1) BANKS WITH FOREIGN OFFICES: Banks of any size that have any "foreign" offices (as defined

below) must file quarterly the Consolidated Reports of Condition and Income for a Bank with Domestic and Foreign Offices (FFIEC 031). For purposes of these reports, all of the following constitute "foreign" offices:

(a) An International Banking Facility (IBF); (b) A branch or consolidated subsidiary in a foreign country; and (c) A majority-owned Edge or Agreement subsidiary. In addition, for banks chartered and headquartered in the 50 states of the United States and the

District of Columbia, a branch or consolidated subsidiary in Puerto Rico or a U.S. territory or possession is a “foreign” office. However, for purposes of these reports, a branch at a U.S. military facility located in a foreign country is a "domestic" office.

(2) BANKS WITHOUT FOREIGN OFFICES: Banks that have domestic offices only must file quarterly: (a) The Consolidated Reports of Condition and Income for a Bank with Domestic and Foreign Offices

(FFIEC 031) if the bank: (i) Is an advanced approaches institutions for regulatory capital purposes,1 regardless of asset

size; or 1 An advanced approaches institution as defined in the federal supervisor’s regulatory capital rules is (i) a subsidiary of a global systemically important bank holding company, as identified pursuant to 12 CFR 217.402; (ii) a Category II institution; (iii) a subsidiary of a depository institution that uses the advanced approaches pursuant to subpart E of 12 CFR part 3 (OCC), 12 CFR part 217 (Board), or 12 CFR part 324 (FDIC) to calculate its risk-based capital requirements; (iv) a subsidiary of a bank holding company or savings and loan holding company that uses the advanced approaches pursuant to subpart E of 12 CFR part 217 to calculate its risk-based capital requirements; or (v) an institution that elects to use the advanced approaches to calculate its risk-based capital requirements.

Category II institutions include institutions that have (1) at least $700 billion in total consolidated assets or (2) at least $75 billion in cross-jurisdictional activity and at least $100 billion in total consolidated assets. In addition, depository institution subsidiaries of Category II institutions are considered Category II institutions.

FFIEC 051 GENERAL INSTRUCTIONS

FFIEC 051 2 GENERAL INSTRUCTIONS (6-20)

(ii) Has total consolidated assets of $100 billion or more, including a bank of this size that is subject to Category III capital standards1;

(b) The Consolidated Reports of Condition and Income for a Bank with Domestic Offices Only (FFIEC 041) if the bank has total consolidated assets less than $100 billion, including a bank of this size that is subject to Category III capital standards, but excluding a bank of this size that is an advanced approaches institution; or

(c) The Consolidated Reports of Condition and Income for a Bank with Domestic Offices Only and Total Assets Less than $5 Billion (FFIEC 051) subject to the eligibility criteria discussed below,

as appropriate to the reporting institution. An institution eligible to file the FFIEC 051 report may

choose instead to file the FFIEC 041 report. For banks chartered and headquartered in Puerto Rico or a U.S. territory or possession, a branch or consolidated subsidiary in one of the 50 states of the United States, the District of Columbia, Puerto Rico, or a U.S. territory or possession is a "domestic" office. For those institutions filing the FFIEC 031 or FFIEC 041, a separate instruction book covers both of these report forms. Please refer to this separate instruction book for the General Instructions for the FFIEC 031 and the FFIEC 041 report forms. Eligibility to File the FFIEC 051 Institutions with domestic offices only and total assets less than $5 billion, excluding (1) those that are advanced approaches institutions or are subject to Category III capital standards for regulatory capital purposes and (2) those that are large or highly complex institutions for deposit insurance assessment purposes,2 are eligible to file the FFIEC 051 Call Report. An institution’s total assets are measured as of June 30 each year to determine the institution’s eligibility to file the FFIEC 051 beginning in March of the following year. For an institution otherwise eligible to file the FFIEC 051, the institution’s primary federal regulatory agency, jointly with the state chartering authority, if applicable, may require the institution to file the FFIEC 041 instead based on supervisory needs. In making this determination, the appropriate agency may consider criteria including, but not limited to, whether the eligible institution is significantly engaged in one or more complex, specialized, or other higher risk activities, such as those for which limited information is reported in the FFIEC 051 compared to the FFIEC 041 (trading; derivatives; mortgage banking; fair value option usage; servicing, securitization, and asset sales; and variable interest entities). The agencies anticipate making such determinations only in a limited number of cases. Close of Business The term "close of business" refers to the time established by the reporting bank as the cut-off time for receipt of work for posting transactions to its general ledger accounts for that day. The time designated as the close of business should be reasonable and applied consistently. The posting of a transaction to the general ledger means that both debit and credit entries are recorded as of the same date. In addition, entries made to general ledger accounts in the period subsequent to the close of business on the report date that are applicable to the period covered by the Call Report (e.g., adjustments of accruals, posting of 1 Category III institutions include institutions, which are not advanced approaches institutions, that have (1) at least $250 billion in average total consolidated assets or (2) at least $100 billion in average total consolidated assets and at least $75 billion in average total nonbank assets, average weighted short-term wholesale funding, or average off-balance sheet exposure. In addition, depository institution subsidiaries of Category III institutions are considered Category III institutions.

2 See 12 CFR § 327.8 and 12 CFR § 327.16(f).

FFIEC 051 GENERAL INSTRUCTIONS

FFIEC 051 13 GENERAL INSTRUCTIONS (6-20)

the bank to a consolidated subsidiary and the corresponding liability of the subsidiary to the bank, (2) a consolidated subsidiary's deposits in the bank and the corresponding cash or interest-bearing asset balance of the subsidiary, and (3) the intercompany interest income and expense related to such loans and deposits of the bank and its consolidated subsidiary.) Exception: For purposes of reporting the total assets of captive insurance and reinsurance subsidiaries in Schedule RC-M, Memoranda, items 14.a and 14.b, only, banks should measure the subsidiaries’ total assets before eliminating intercompany transactions between the consolidated subsidiary and other offices or subsidiaries of the consolidated bank. Otherwise, captive insurance and reinsurance subsidiaries should be reported on a consolidated basis as described in the preceding paragraph. Subsidiaries of subsidiaries – For a subsidiary of a bank which is in turn the parent of one or more subsidiaries: (1) Each subsidiary shall consolidate its majority-owned subsidiaries in accordance with the

consolidation requirements set forth above. (2) Each subsidiary shall account for any investments in unconsolidated subsidiaries, corporate joint

ventures over which the bank exercises significant influence, and associated companies according to the equity method of accounting.

Noncontrolling (minority) interests – A noncontrolling interest, sometimes called a minority interest, is the portion of equity in a bank’s subsidiary not attributable, directly or indirectly, to the parent bank. Report noncontrolling interests in the reporting bank's consolidated subsidiaries in Schedule RC, item 27.b, "Noncontrolling (minority) interests in consolidated subsidiaries," of the Consolidated Report of Condition. Report the portion of consolidated net income reported in Schedule RI, item 12, that is attributable to noncontrolling interests in consolidated subsidiaries of the bank in Schedule RI, item 13, of the Consolidated Report of Income. Deposit insurance assessments – When one FDIC-insured institution that files the FFIEC 051 owns another FDIC-insured institution as a subsidiary, the parent institution should complete items 1 through 11 (except item 9.a) and Memorandum items 1 through 3 of Schedule RC-O by accounting for the insured institution subsidiary under the equity method of accounting instead of consolidating it, i.e., on an “unconsolidated single FDIC certificate number basis.” (However, an FDIC-insured institution that owns another FDIC-insured institution should complete item 9.a of Schedule RC-O by consolidating its subsidiary institution.) In contrast, when an FDIC-insured institution consolidates entities other than FDIC-insured institutions for purposes of Schedule RC, Balance Sheet, the parent institution should complete items 1 through 11 and Memorandum items 1 through 3 of Schedule RC-O on a consolidated basis with respect to these other entities. However, all deposits of subsidiaries (except an insured depository institution subsidiary) that are consolidated and, therefore, eliminated from reported deposits on the balance sheet (Schedule RC, item 13.a) must be reported in Schedule RC-O, items 1 and 2 and Memorandum items 1 and 2, as appropriate. Similarly, the interest accrued and unpaid on these deposits, which is eliminated in consolidation from reported other liabilities on the balance sheet (Schedule RC, item 20), also must be reported in these Schedule RC-O items. Cutoff dates for consolidation – All branches must be consolidated as of the report date. For purposes of consolidation, the date of the financial statements of a subsidiary should, to the extent practicable, match the report date of the parent bank, but in no case differ by more than 93 days from the report date.

FFIEC 051 GENERAL INSTRUCTIONS

FFIEC 051 14 GENERAL INSTRUCTIONS (6-20)

PUBLICATION REQUIREMENTS FOR THE CONSOLIDATED REPORT OF CONDITION There are no federal requirements for a bank to publish the balance sheet of the Consolidated Report of Condition in a newspaper. However, state-chartered banks should consult with their state banking authorities concerning the applicability of any state publication requirements. RELEASE OF INDIVIDUAL BANK REPORTS All schedules of the FFIEC 051 Call Report submitted by each reporting bank, including the optional narrative statement at the end of the Call Report, are available to the public from the federal bank supervisory agencies with the exception of any amounts reported in Schedule RI-E, item 2.g, “FDIC deposit insurance assessments,” and, for report dates beginning June 30, 2020, in Schedule RC-C, Part I, Memorandum items 17.a and 17.b, for eligible loan modifications under Section 4013 of the 2020 Coronavirus Aid, Relief, and Economic Security Act. Refer to the discussion of “Release of Individual Bank Reports” in the General Instructions section of the instructions for the FFIEC 031 and FFIEC 041 Call Reports for information on items reported in the FFIEC 041 Call Report before the March 2017 implementation of the FFIEC 051 Call Report that are not publicly disclosed on an individual bank basis. All publicly available individual institution data are posted on the FFIEC’s Central Data Repository (CDR) Public Data Distribution website (https://cdr.ffiec.gov/public/) as soon as the data have been submitted, placed in an accepted status, and prepared for publication in the CDR. A reporting institution may request confidential treatment for some or all of the portions of the Call Report that will be made publicly available if the institution is of the opinion that disclosure of specific commercial or financial information in the report would likely cause substantial harm to its competitive position. In certain limited circumstances, the reporting institution’s primary federal supervisor may approve confidential treatment of some or all of the items for which such treatment has been requested if the institution has clearly provided a compelling justification for the request. A request for confidential treatment must be submitted in writing prior to the submission of the report. The written request must identify the specific items for which confidential treatment is requested, provide justification for the confidential treatment requested for the identified items, and demonstrate the specific nature of the harm that would result from public release of the information. Merely stating that competitive harm would result is not sufficient. Information for which confidential treatment is requested may subsequently be released by the reporting institution’s primary federal supervisor in accordance with the terms of 12 CFR 4.16 (OCC), 12 CFR 261.16 (Federal Reserve Board), 12 CFR 309.6 (FDIC), or as otherwise provided by law. APPLICABILITY OF U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES TO REGULATORY REPORTING REQUIREMENTS For recognition and measurement purposes, the regulatory reporting requirements applicable to the Call Report shall conform to U.S. generally accepted accounting principles (GAAP) as set forth in the FASB’s Accounting Standards Codification. Nevertheless, because the Call Report is an institution-level report, each institution (together with its consolidated subsidiaries) is considered an "accounting entity" for regulatory reporting purposes and normally must prepare its Call Report on a separate entity basis. A bank or savings association that is a private company, as defined in U.S. GAAP (and discussed in the Glossary entry for “public business entity”), is permitted to use private company accounting alternatives issued by the FASB when preparing its Call Reports, except as provided in Section 37(a) of the Federal Deposit Insurance Act (12 U.S.C. 1831n(a)) as described in the following sentence. If the banking agencies determine that a particular accounting principle within U.S. GAAP, including a private company accounting alternative, is inconsistent with the statutorily specified supervisory objectives, the banking agencies may prescribe an accounting principle for regulatory reporting purposes that is no less stringent than U.S. GAAP. In such a situation, an institution would not be permitted to use that particular private

FFIEC 051 RC - BALANCE SHEET

FFIEC 051 RC-1 RC - BALANCE SHEET (6-20)

LINE ITEM INSTRUCTIONS FOR THE CONSOLIDATED REPORT OF CONDITION The line item instructions should be read in conjunction with the Glossary and other sections of these instructions. See the discussion of the Organization of the Instruction Books in the General Instructions. For purposes of these Consolidated Report of Condition instructions, the Financial Accounting Standards Board (FASB) Accounting Standards Codification is referred to as the “ASC.” SCHEDULE RC – BALANCE SHEET ASSETS Item No. Caption and Instructions 1 Cash and balances due from depository institutions. Treatment of reciprocal balances with depository institutions – Reciprocal balances arise

when two depository institutions maintain deposit accounts with each other, i.e., when a reporting bank has both a "due from" and a "due to" balance with another depository institution. Reciprocal balances between the reporting bank and other depository institutions may be reported on a net basis in accordance with generally accepted accounting principles. Net "due from" balances should be reported in items 1.a and 1.b below, as appropriate. Net "due to" balances should be reported as deposit liabilities in Schedule RC, item 13 below. See the Glossary entry for "reciprocal balances."

1.a Noninterest-bearing balances and currency and coin. Report the total of all

noninterest-bearing balances due from depository institutions, currency and coin, cash items in process of collection, and unposted debits.

For purposes of these reports, deposit accounts "due from" other depository institutions that

are overdrawn are to be reported as borrowings in Schedule RC, item 16, and in Schedule RC-M, item 5.b, except overdrawn "due from" accounts arising in connection with checks or drafts drawn by the reporting bank and drawn on, or payable at or through, another depository institution either on a zero-balance account or on an account that is not routinely maintained with sufficient balances to cover checks or drafts drawn in the normal course of business during the period until the amount of the checks or drafts is remitted to the other depository institution (in which case, report the funds received or held in connection with such checks or drafts as deposits in Schedule RC-E until the funds are remitted). For further information, refer to the Glossary entry for "overdraft."

FFIEC 051 RC - BALANCE SHEET

FFIEC 051 RC-2 RC - BALANCE SHEET (6-20)

Item No. Caption and Instructions 1.a Cash items in process of collection include: (cont.) (1) Checks or drafts in process of collection that are drawn on another depository institution

(or on a Federal Reserve Bank) and that are payable immediately upon presentation in the United States. This includes:

(a) Checks or drafts drawn on other institutions that have already been forwarded for

collection but for which the reporting bank has not yet been given credit ("cash letters").

(b) Checks or drafts on hand that will be presented for payment or forwarded for

collection on the following business day. (c) Checks or drafts that have been deposited with the reporting bank's correspondent

and for which the reporting bank has already been given credit, but for which the amount credited is not subject to immediate withdrawal ("ledger credit" items).

However, if the reporting bank has been given immediate credit by its correspondent for

checks or drafts presented for payment or forwarded for collection and if the funds on deposit are subject to immediate withdrawal, the amount of such checks or drafts is considered part of the reporting bank's balances due from depository institutions.

(2) Government checks drawn on the Treasurer of the United States or any other

government agency that are payable immediately upon presentation and that are in process of collection.

(3) Such other items in process of collection that are payable immediately upon presentation

and that are customarily cleared or collected as cash items by depository institutions in the United States, such as:

(a) Redeemed United States savings bonds and food stamps. (b) Amounts associated with automated payment arrangements in connection with

payroll deposits, federal recurring payments, and other items that are credited to a depositor's account prior to the payment date to ensure that the funds are available on the payment date.

(c) Federal Reserve deferred account balances until credit has been received in

accordance with the appropriate time schedules established by the Federal Reserve Banks. At that time, such balances are considered part of the reporting bank's balances due from depository institutions.

(d) Checks or drafts drawn on another depository institution that have been deposited in

one office of the reporting bank and forwarded for collection to another office of the reporting bank.

(e) Brokers' security drafts and commodity or bill-of-lading rafts payable immediately

upon presentation in the U.S. (See the Glossary entries for "broker's security draft" and "commodity or bill-of-lading draft" for the definitions of these terms.)

FFIEC 051 RC - BALANCE SHEET

FFIEC 051 RC-4a RC - BALANCE SHEET (6-20)

Item No. Caption and Instructions 2.b Available-for-sale securities. Report the amount from Schedule RC-B, item 8, column D, "Total fair value." NOTE: Item 2.c is to be completed only by institutions that have adopted FASB Accounting Standards Update No. 2016-01 (ASU 2016-01), which includes provisions governing the accounting for investments in equity securities, including investment in mutual funds, and eliminates the concept of available-for-sale equity securities. ASU 2016-01 requires holdings of equity securities (except those accounted for under the equity method or that result in consolidation), including other ownership interests (such as partnerships, unincorporated joint ventures, and limited liability companies), to be measured at fair value with changes in the fair value recognized through net income. However, an institution may choose to measure equity securities and other equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Institutions that have not adopted ASU 2016-01 should leave item 2.c blank and report their holdings of equity securities with readily determinable fair values not held for trading as available-for-sale equity securities in Schedule RC-B, item 7, and in Schedule RC, item 2.b. For institutions that are public business entities, as defined in U.S. GAAP, ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For example, an institution with a calendar year fiscal year that is a public business entity must begin to apply ASU 2016-01 in its Call Report for March 31, 2018. For all other institutions, ASU 2016-01 is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. For example, an institution with a calendar year fiscal year that is not a public business entity must begin to apply ASU 2016-01 in its Call Report for December 31, 2019. Early application of ASU 2016-01 is permitted for all institutions that are not public business entities as of fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. 2.c Equity securities with readily determinable fair values not held for trading. Report the

fair value of all investments in mutual funds and other equity securities (as defined in ASC Topic 321, Investments-Equity Securities) with readily determinable fair values that are not held for trading. Such securities include, but are not limited to, money market mutual funds, mutual funds that invest solely in U.S. Government securities, common stock, and perpetual preferred stock. Perpetual preferred stock does not have a stated maturity date and cannot be redeemed at the option of the investor, although it may be redeemable at the option of the issuer.

Exclude equity securities held for trading from Schedule RC, item 2.c. For purposes of the

Call Report balance sheet, trading activities typically include (a) regularly underwriting or dealing in securities; interest rate, foreign exchange rate, commodity, equity, and credit derivative contracts; other financial instruments; and other assets for resale, (b) acquiring or taking positions in such items principally for the purpose of selling in the near term or otherwise with the intent to resell in order to profit from short-term price movements, and (c) acquiring or taking positions in such items as accommodations to customers, provided that acquiring or taking such positions meets the definition of “trading” in ASC Topic 320, Investments–Debt Securities, and ASC Topic 815, Derivatives and Hedging, and the definition of “trading purposes” in ASC Topic 815. When an institution’s holdings of equity securities with readily determinable fair values fall within the scope of the preceding description of trading activities, the equity securities should be reported as trading assets in Schedule RC, item 5. Otherwise, the equity securities should be reported in this item 2.c.

According to ASC Topic 321, the fair value of an equity security is readily determinable if

sales prices or bid-and-asked quotations are currently available on a securities exchange registered with the U.S. Securities and Exchange Commission (SEC) or in the over-the-counter market, provided that those prices or quotations for the over-the-counter market are publicly reported by the National Association of Securities Dealers Automated Quotations

FFIEC 051 RC - BALANCE SHEET

FFIEC 051 RC-4b RC - BALANCE SHEET (6-20)

Item No. Caption and Instructions 2.c systems or by OTC Markets Group Inc. (“Restricted stock” meets that definition if the (cont.) restriction terminates within one year.) The fair value of an equity security traded only in a

foreign market is readily determinable if that foreign market is of a breadth and scope comparable to one of the U.S. markets referred to above. The fair value of an investment in a mutual fund (or in a structure similar to a mutual fund, i.e., a limited partnership or a venture capital entity) is readily determinable if the fair value per share (unit) is determined and published and is the basis for current transactions.

Investments in mutual funds and other equity securities with readily determinable fair values

may have been purchased by the reporting institution or acquired for debts previously contracted.

Include in this item common stock and perpetual preferred stock of the Federal National

Mortgage Association (Fannie Mae), common stock and perpetual preferred stock of the Federal Home Loan Mortgage Corporation (Freddie Mac), Class A voting and Class C non-voting common stock of the Federal Agricultural Mortgage Corporation (Farmer Mac), and common and preferred stock of SLM Corporation (the private-sector successor to the Student Loan Marketing Association).

Exclude from equity securities with readily determinable fair values not held for trading: (1) Federal Reserve Bank stock (report as an equity investment without a readily

determinable fair value in Schedule RC-F, item 4). (2) Federal Home Loan Bank stock (report as an equity investment without a readily

determinable fair value in Schedule RC-F, item 4). (3) Common and preferred stocks that do not have readily determinable fair values, such as

stock of bankers' banks and Class B voting common stock of the Federal Agricultural Mortgage Corporation (Farmer Mac) (report in Schedule RC-F, item 4).

(4) Preferred stock that by its terms either must be redeemed by the issuing enterprise or is

redeemable at the option of the investor (i.e., redeemable or limited-life preferred stock), including trust preferred securities subject to mandatory redemption (report such preferred stock as an other debt security in Schedule RC-B, item 6).

(5) "Restricted stock," i.e., equity securities for which sale is restricted by governmental or

contractual requirement (other than in connection with being pledged as collateral), except if that requirement terminates within one year or if the holder has the power by contract or otherwise to cause the requirement to be met within one year (if the restriction does not terminate within one year, report "restricted stock" as an equity investment without a readily determinable fair value in Schedule RC-F, item 4).

(6) Participation certificates issued by a Federal Intermediate Credit Bank, which represent

nonvoting stock in the bank (report as an equity investment without a readily determinable fair value in Schedule RC-F, item 4).

(7) Minority interests held by the reporting institution in any companies not meeting the

definition of associated company (report as equity investments without readily determinable fair values in Schedule RC-F, item 4), except minority holdings that indirectly represent bank premises (report in Schedule RC, item 6) or other real estate owned (report in Schedule RC, item 7), provided that the fair value of any capital stock representing the minority interest is not readily determinable. (See the Glossary entry for "subsidiaries" for the definition of associated company.)

FFIEC 051 RC - BALANCE SHEET

FFIEC 051 RC-7 RC - BALANCE SHEET (6-20)

Item No. Caption and Instructions 4.b Loans and leases held for investment. Report the amount of loans and leases that

the reporting bank has the intent and ability to hold for the foreseeable future or until maturity or payoff, i.e., loans held for investment. Include loans held for investment that the bank has elected to account for at fair value under a fair value option, which should be reported in this item at fair value. All loans and leases reported in this item must also be reported by loan category in Schedule RC-C, Part I.

4.c Less: Allowance for loan and lease losses. For institutions that have not adopted FASB

Accounting Standards Update No. 2016-13 (ASU 2016-13), which governs the accounting for credit losses, report the allowance for loan and lease losses as determined in accordance with the instructions in the Glossary entry for "allowance for loan and lease losses." For institutions that have adopted ASU 2016-13, report the allowance for credit losses on loans and leases. Also include in this item any allocated transfer risk reserve related to loans and leases held for investment that the reporting bank is required to establish and maintain as specified in Section 905(a) of the International Lending Supervision Act of 1983, in the agency regulations implementing the Act (Subpart D of Federal Reserve Regulation K, Part 347 of the FDIC’s Rules and Regulations, and Subpart C of Part 28 of the Comptroller of the Currency’s Regulations), and in any guidelines, letters, or instructions issued by the agencies. This item must equal Report of Income Schedule RI-B, Part II, item 7, column A, “Balance end of current period.”

4.d Loans and leases held for investment, net of allowance. Report the amount derived by

subtracting Schedule RC, item 4.c, from Schedule RC, item 4.b. 5 Trading assets. Trading activities typically include (a) regularly underwriting or dealing in

securities; interest rate, foreign exchange rate, commodity, equity, and credit derivative contracts; other financial instruments; and other assets for resale; (b) acquiring or taking positions in such items principally for the purpose of selling in the near term or otherwise with the intent to resell in order to profit from short-term price movements; or (c) acquiring or taking positions in such items as accommodations to customers, provided that acquiring or taking such positions meets the definition of “trading” in ASC Topic 320, Investments–Debt Securities, and ASC Topic 815, Derivatives and Hedging, and the definition of “trading purposes” in ASC Topic 815. Assets and other financial instruments held for trading shall be consistently valued at fair value as defined by ASC Topic 820, Fair Value Measurement.

For purposes of the Consolidated Reports of Condition and Income, all debt securities within

the scope of ASC Topic 320, Investments-Debt Securities, that a bank has elected to report at fair value under a fair value option with changes in fair value reported in current earnings should be classified as trading securities. In addition, for purposes of these reports, banks may classify assets (other than debt securities within the scope of ASC Topic 320 for which a fair value option is elected) as trading if the bank applies fair value accounting, with changes in fair value reported in current earnings, and manages these assets as trading positions, subject to the controls and applicable regulatory guidance related to trading activities. For example, a bank would generally not classify a loan to which it has applied the fair value option as a trading asset unless the bank holds the loan, which it manages as a trading position, for one of the following purposes: (1) for market making activities, including such activities as accumulating loans for sale or securitization; (2) to benefit from actual or expected price movements; or (3) to lock in arbitrage profits.

Do not include in this item the carrying value of any available-for-sale securities, any loans

that are held for sale (and are not classified as trading in accordance with the preceding instruction), and any leases that are held for sale. Available-for-sale debt securities are reported in Schedule RC, item 2.b, and in Schedule RC-B, columns C and D. Loans (not classified as trading) and leases held for sale should be reported in Schedule RC, item 4.a, "Loans and leases held for sale," and in Schedule RC-C.

FFIEC 051 RC - BALANCE SHEET

FFIEC 051 RC-8 RC - BALANCE SHEET (6-20)

Item No. Caption and Instructions 5 Trading assets also include derivatives with a positive fair value resulting from the "marking to (cont.) market" of interest rate, foreign exchange rate, commodity, equity, and credit derivative

contracts held for trading purposes as of the report date. Derivative contracts with the same counterparty that have positive fair values and negative fair values and meet the criteria for a valid right of setoff contained in ASC Subtopic 210-20, Balance Sheet – Offsetting (e.g., those contracts subject to a qualifying master netting agreement) may be reported on a net basis using this item and Schedule RC, item 15, "Trading liabilities," as appropriate. (See the Glossary entry for "offsetting.")

6 Premises and fixed assets. Report the book value, less accumulated depreciation or

amortization, of all premises, equipment, furniture and fixtures purchased directly or acquired by means of a capital lease. Any method of depreciation or amortization conforming to accounting principles that are generally acceptable for financial reporting purposes may be used. However, depreciation for premises and fixed assets may be based on a method used for federal income tax purposes if the results would not be materially different from depreciation based on the asset's estimated useful life.

Do not deduct mortgages or other liens on such property (report in Schedule RC, item 16,

"Other borrowed money"). Include as premises and fixed assets: (1) Premises that are actually owned and occupied (or to be occupied, if under construction)

by the bank, its branches, or its consolidated subsidiaries. (2) Leasehold improvements, vaults, and fixed machinery and equipment. (3) Remodeling costs to existing premises. (4) Real estate acquired and intended to be used for future expansion. (5) Parking lots that are used by customers or employees of the bank, its branches, and its

consolidated subsidiaries. (6) Furniture, fixtures, and movable equipment of the bank, its branches, and its consolidated

subsidiaries. (7) Automobiles, airplanes, and other vehicles owned by the bank and used in the conduct of

its business. (8) The amount of capital lease property (with the bank as lessee): premises, furniture,

fixtures, and equipment. See the discussion of accounting with bank as lessee in the Glossary entry for "lease accounting."

(9) (a) Stocks and bonds issued by nonmajority-owned corporations and (b) Investments in limited partnerships or limited liability companies (other than

investments so minor that the institution has virtually no influence over the partnership or company)

whose principal activity is the ownership of land, buildings, equipment, furniture, or fixtures occupied or used (or to be occupied or used) by the bank, its branches, or its consolidated subsidiaries. For institutions that have adopted ASU 2016-01 (see the Note preceding the instructions for Schedule RC, item 2.c), report such stocks and

.

FFIEC 051 RC-O - ASSESSMENTS

FFIEC 051 RC-O-3 RC-O - ASSESSMENTS (6-20)

Item No. Caption and Instructions 4 Average consolidated total assets for the calendar quarter. Report average consolidated

total assets for the calendar quarter on a single FDIC certificate number basis in accordance with the guidance on “Averaging method” and “Measuring average consolidated total assets” below. For purposes of this item, average consolidated total assets is not a quarterly average of total assets measured in accordance with the instructions for Schedule RC, item 12, “Total assets.”

Averaging methods – An institution that reported $1 billion or more in quarter-end

consolidated total assets in its Consolidated Reports of Condition and Income (Schedule RC, item 12, “Total assets”) or Thrift Financial Report (Schedule SC, line item SC60, “Total assets”) for March 31, 2011, and any institution that becomes FDIC-insured after March 31, 2011, must report average consolidated total assets in this item on a daily average basis. An institution that reported less than $1 billion in quarter-end consolidated total assets in its Consolidated Reports of Condition and Income (Schedule RC, item 12, “Total assets”) or Thrift Financial Report (Schedule SC, line item SC60, “Total assets”) for March 31, 2011, may report average consolidated total assets in this item on a weekly average basis, or it may at any time opt permanently to report average consolidated total assets on a daily average basis. Once an institution that reports average consolidated total assets using a weekly average reports average consolidated total assets of $1 billion or more in this item for two consecutive quarters, it must permanently report average consolidated total assets using daily averaging beginning the next quarter.

Daily average consolidated total assets should be calculated by adding the institution’s

consolidated total assets as of the close of business for each day of the calendar quarter and dividing by the number of days in the calendar quarter (the number of days in a quarter ranges from 90 days to 92 days). For days that an institution is closed (e.g., Saturdays, Sundays, or holidays), the amount from the previous business day would be used. An institution is considered closed if there are no transactions posted to the general ledger as of that date.

Weekly average consolidated total assets should be calculated by adding the institution’s

consolidated total assets as of the close of business on each Wednesday during the calendar quarter and dividing by the number of Wednesdays in the quarter.

An institution that becomes newly insured and begins operating during the calendar quarter

should report average consolidated total assets on a daily average basis. Daily average consolidated total assets for such an institution should be calculated by adding the institution’s consolidated total assets as of the close of business for each day during the quarter since it became insured and operational, and dividing by the number of calendar days since it became insured and operational.

Measuring average consolidated total assets – Average consolidated total assets should be

measured in accordance with the instructions for Schedule RC-K, item 9, average “Total assets” (i.e., including the adjustments for available-for-sale debt and equity securities), except as follows:

(1) If the reporting institution has an FDIC-insured depository institution subsidiary, the

subsidiary should not be consolidated. Instead, the reporting institution’s investment in this subsidiary should be included in average consolidated total assets using the equity method of accounting.

FFIEC 051 RC-O - ASSESSMENTS

FFIEC 051 RC-O-4 RC-O - ASSESSMENTS (6-20)

Item No. Caption and Instructions 4 (2) If the reporting institution is the surviving or resulting institution in a merger or (cont.) consolidation that occurred during the calendar quarter, the reporting institution should

calculate its average consolidated total assets by including the consolidated total assets of all FDIC-insured depository institutions that were merged or consolidated into the reporting institution as if the merger or consolidation occurred on the first day of the calendar quarter. Acceptable methods for including a merged or consolidated FDIC-insured depository institution’s consolidated total assets in this calculation for the days during the calendar quarter preceding the merger or consolidation date include using either (a) the acquisition date fair value of the merged or consolidated institution’s consolidated total assets for all days (or all Wednesdays) during the calendar quarter preceding the acquisition date or (b) the merged or consolidated institution’s consolidated total assets, as defined for Schedule RC-K, item 9, average “Total assets,” for each day (or each Wednesday) during the calendar quarter preceding the acquisition date.1

(3) If the reporting institution was acquired in a transaction that became effective during the

calendar quarter and push down accounting was used to account for the acquisition, the reporting institution should calculate its average consolidated total assets as if the acquisition occurred on the first day of the calendar quarter. Acceptable methods for including the institution’s consolidated total assets in this calculation for the days during the calendar quarter preceding the acquisition date include using either (a) the acquisition date fair value of the reporting institution’s consolidated total assets for all days (or all Wednesdays) during the calendar quarter preceding the acquisition date or (b) the reporting institution’s consolidated total assets, as defined for Schedule RC-K, item 9, average “Total assets,” for each day (or each Wednesday) during the calendar quarter preceding the acquisition date.

4.a Averaging method used. Indicate the averaging method that the reporting institution used

to report its average consolidated total assets in Schedule RC-O, item 4, above. For daily averaging, enter the number “1”; for weekly averaging, enter the number “2.”

5 Average tangible equity for the calendar quarter. Report average tangible equity for the

calendar quarter on an unconsolidated single FDIC certificate number basis in accordance with the guidance on “Averaging methods” and “Measuring tangible equity” below. For purposes of this item, tangible equity is defined as Tier 1 capital as set forth in the banking agencies’ regulatory capital standards and reported in Schedule RC-R, Part I, item 26, except as described below under “Measuring tangible equity.”

NOTE: In accordance with Section 327.5(a)(2) of the FDIC’s regulations, daily averaging of

tangible equity for purposes of reporting in this item is not permitted. As described below under “Averaging methods,” the amount to be reported in this item should only be either: (1) quarter-end tangible equity as of the last day of the quarter; or (2) the average of the three month-end Tier 1 capital balances for the quarter.

1 This approach to calculating average consolidated total assets for purposes of Schedule RC-O, item 4, does not apply if the reporting institution is the surviving or resulting institution in a merger or consolidation during the calendar quarter involving an entity, such as a credit union, that is not an FDIC-insured depository institution. In such a merger or consolidation, the reporting institution should apply the guidance on business combinations in the General Instructions for Schedule RC-K when measuring average consolidated total assets for purposes of Schedule RC-O, item 4.

FFIEC 051 RC-R – REGULATORY CAPITAL

FFIEC 051 RC-R-1 RC-R – REGULATORY CAPITAL (6-20)

SCHEDULE RC-R – REGULATORY CAPITAL General Instructions for Schedule RC-R The instructions for Schedule RC-R should be read in conjunction with the regulatory capital rules issued by the primary federal supervisory authority of the reporting bank or saving association (collectively, banks): for national banks and federal savings associations, 12 CFR Part 3; for state member banks, 12 CFR Part 217; and for state nonmember banks and state savings associations, 12 CFR Part 324. These instructions exclude updates pertaining to the regulatory capital-related interim final rules (IFRs) issued by the banking agencies from March through June 2020. See the separate standalone June 2020 COVID-19 Related Supplemental Instructions (Call Report) for instructional changes related to these IFRs.

Part I. Regulatory Capital Components and Ratios

Contents – Part I. Regulatory Capital Components and Ratios

General Instructions for Schedule RC-R, Part I RC-R-1

Community Bank Leverage Ratio Framework RC-R-1

Item Instructions for Schedule RC-R, Part I RC-R-3

Common Equity Tier 1 Capital RC-R-3 Common Equity Tier 1 Capital: Adjustments and Deductions RC-R-6 Additional Tier 1 Capital RC-R-15 Tier 1 Capital RC-R-20

Total Assets for the Leverage Ratio RC-R-20 Leverage Ratio RC-R-22 Qualifying Criteria and Other Information for CBLR Institutions RC-R-22 Tier 2 Capital RC-R-25

Total Capital RC-R-30

Total Risk-Weighted Assets RC-R-30

Risk-Based Capital Ratios RC-R-30

Capital Buffer RC-R-31

General Instructions for Schedule RC-R, Part I. Community Bank Leverage Ratio Framework Opting into the Community Bank Leverage Ratio (CBLR) Framework ‒ A qualifying institution may opt into the CBLR framework. A qualifying institution opts into and out of the framework through its reporting in Call Report Schedule RC-R. A qualifying institution that opts into the CBLR framework (CBLR electing institution) must complete Schedule RC-R, Part I, items 1 through 37 and, if applicable, items 38.a

FFIEC 051 RC-R – REGULATORY CAPITAL

FFIEC 051 RC-R-2 RC-R – REGULATORY CAPITAL (6-20)

General Instructions for Schedule RC-R, Part I. (cont.) through 38.c, and makes that election in Schedule RC-R, Part I, item 31.a. A qualifying institution can opt out of the CBLR framework by completing Schedule RC-R, Parts I and II, excluding Schedule RC-R, Part I, items 32 through 38.c. In general, an institution may qualify for the CBLR framework if it has a leverage ratio greater than 9 percent (as reported in Schedule RC-R, Part I, item 31); has less than $10 billion in total consolidated assets (Schedule RC-R, Part I, item 32); is not an advanced approaches institution;1 has total trading assets and trading liabilities of 5 percent or less of total consolidated assets (Schedule RC-R, Part I, item 33); and has total off-balance sheet exposures (excluding derivatives other than sold credit derivatives and unconditionally cancelable commitments) of 25 percent or less of total consolidated assets (Schedule RC-R, Part I, item 34). However, an otherwise qualifying institution’s primary federal supervisory authority may disallow the institution’s use of the CBLR framework based on the supervisory authority’s evaluation of the risk profile of the institution. A qualifying institution with a leverage ratio that exceeds 9 percent and opts into the CBLR framework shall be considered to have met: (i) the generally applicable risk-based and leverage capital requirements in the agencies’ capital rules; (ii) the capital ratio requirements to be considered well capitalized under the agencies’ prompt corrective action (PCA) framework (in the case of insured depository institutions); and (iii) any other applicable capital or leverage requirements.2 Ceasing to Have a CBLR Greater Than 9 Percent or Failing to Meet Any of the Qualifying Criteria ‒ A qualifying institution that temporarily fails to meet any of the qualifying criteria, including the greater than 9 percent leverage ratio requirement, generally would still be deemed well-capitalized so long as the institution maintains a leverage ratio greater than 8 percent. At the end of the grace period (see below), the institution must meet all qualifying criteria to remain in the community bank leverage ratio framework or otherwise must apply and report under the generally applicable capital rule. Similarly, an institution with a leverage ratio of 8 percent or less is not eligible for the grace period and must comply with the generally applicable capital rule, i.e., for the calendar quarter in which the institution reports a leverage ratio of 8 percent or less, by completing all of Schedule RC-R, Parts I and II, excluding Schedule RC-R, Part I, items 32 through 38.c. Under the CBLR framework, the grace period will begin as of the end of the calendar quarter in which the CBLR electing institution ceases to satisfy any of the qualifying criteria and will end after two consecutive calendar quarters. For example, if the CBLR electing institution no longer meets one of the qualifying criteria as of February 15, and still does not meet the criteria as of the end of that quarter, the grace period for such an institution will begin as of the end of the quarter ending March 31. The institution may continue to use the community bank leverage ratio framework as of June 30, but will need to comply fully with the generally applicable rule (including the associated Schedule RC-R reporting requirements) as of September 30, unless the institution once again meets all qualifying criteria of the CBLR framework, including a leverage ratio of greater than 9 percent, before that time. 1 An institution that is subject to the advanced approaches capital rule (i.e., an advanced approaches institution as defined in the federal banking agencies’ regulatory capital rules) is (i) a subsidiary of a global systemically important bank holding company, as identified pursuant to 12 CFR 217.402; (ii) a Category II institution; (iii) a subsidiary of a depository institution that uses the advanced approaches pursuant to subpart E of 12 CFR part 3 (OCC), 12 CFR part 217 (Board), or 12 CFR part 324 (FDIC) to calculate its risk-based capital requirements; (iv) a subsidiary of a bank holding company or savings and loan holding company that uses the advanced approaches pursuant to subpart E of 12 CFR part 217 to calculate its risk-based capital requirements; or (v) an institution that elects to use the advanced approaches to calculate its risk-based capital requirements.

Category II institutions include institutions with (1) at least $700 billion in total consolidated assets or (2) at least $75 billion in cross-jurisdictional activity and at least $100 billion in total consolidated assets. In addition, depository institution subsidiaries of Category II institutions are considered Category II institutions.

2 See 12 CFR 3 (OCC); 12 CFR 217 (Board); 12 CFR 324 (FDIC).

FFIEC 051 RC-R – REGULATORY CAPITAL

FFIEC 051 RC-R-3 RC-R – REGULATORY CAPITAL (6-20)

Item Instructions for Schedule RC-R, Part I. Item No. Caption and Instructions Common Equity Tier 1 Capital 1 Common stock plus related surplus, net of treasury stock and unearned employee

stock ownership plan (ESOP) shares. Report the sum of Schedule RC, items 24, 25, and 26.c, as follows:

(1) Common stock: Report the amount of common stock reported in Schedule RC, item 24,

provided it meets the criteria for common equity tier 1 capital based on the regulatory capital rules of the institution’s primary federal supervisor. Include capital instruments issued by mutual banking organizations that meet the criteria for common equity tier 1 capital.

(2) Related surplus: Adjust the amount reported in Schedule RC, item 25 as follows: include

the net amount formally transferred to the surplus account, including capital contributions, and any amount received for common stock in excess of its par or stated value on or before the report date; exclude adjustments arising from treasury stock transactions.

(3) Treasury stock, unearned ESOP shares, and any other contra-equity components:

Report the amount of contra-equity components reported in Schedule RC, item 26.c. Because contra-equity components reduce equity capital, the amount reported in Schedule RC, item 26.c, is a negative amount.

2 Retained earnings. Report the amount of the institution’s retained earnings as reported in

Schedule RC, item 26.a. An institution that has adopted FASB Accounting Standards Update No. 2016-13

(ASU 2016-13), which governs the accounting for credit losses and introduces the current expected credit losses methodology (CECL), and has elected to apply the 3-year CECL transition provision (3-year CECL electing institution) should also include in this item its applicable CECL transitional amount, in accordance with section 301 of the regulatory capital rules. Specifically, a 3-year CECL electing institution includes 75 percent of its CECL transitional amount during the first year of the transition period, 50 percent of its CECL transitional amount during the second year of the transition period, and 25 percent of its CECL transitional amount during the third year of the transition period.

Example and a worksheet calculation for the 3-year CECL transition provision: Assumptions:

• For example, consider an institution that elects to apply the 3-year CECL transition and has a CECL effective date of January 1, 2020, and a 21 percent tax rate.

• On the closing balance sheet date immediately prior to adopting CECL (i.e., December 31, 2019), the 3-year CECL electing institution has $10 million in retained earnings and $1 million in the allowance for loan and lease losses. On the opening balance sheet date immediately after adopting CECL (i.e., January 1, 2020), the CECL electing institution has $1.2 million in allowances for credit losses (ACL), which also equals $1.2 million of adjusted allowances for credit losses (AACL), as defined in the regulatory capital rules.

• The 3-year CECL electing institution recognizes the effect of the adoption of CECL as of January 1, 2020, by recording an increase in its ACL of $200,000 (credit), with an offsetting increase in temporary difference deferred tax assets (DTAs) of $42,000 (debit) and a reduction in beginning retained earnings of $158,000 (debit).

FFIEC 051 RC-R – REGULATORY CAPITAL

FFIEC 051 RC-R-4 RC-R – REGULATORY CAPITAL (6-20)

Part I. (cont.) Item No. Caption and Instructions 2 • For each of the quarterly reporting periods in year 1 of the transition period (i.e., 2020), (cont.) the 3-year CECL electing institution increases both retained earnings and average total

consolidated assets by $118,500 ($158,000 x 75 percent), decreases temporary difference DTAs by $31,500 ($42,000 x 75 percent), and decreases AACL by $150,000 ($200,000 x 75 percent) for purposes of calculating its regulatory capital ratios. The remainder of the 3-year CECL transition provision of the 3-year CECL electing institution is transitioned into regulatory capital according to the schedule provided in Table 1 below.

Table 1 – Example of a 3-Year CECL Transition Provision Schedule

Dollar Amounts in Thousands

Transitional Amounts

Transitional Amounts Applicable During Each Year of the 3-Year Transition Period Year 1 at 75% Year 2 at 50% Year 3 at 25%

Column A Column B Column C Column D 1. Increase retained earnings and average total consolidated assets by the CECL transitional amount

CECL transitional amount = $158

$118.50 $79 $39.50

2. Decrease temporary difference DTAs by the DTA transitional amount

DTA transitional amount = $42

$31.50 $21 $10.50

3. Decrease AACL by the AACL transitional amount

AACL transitional amount = $200

$150 $100 $50

2.a To be completed only by institutions that have adopted ASU 2016-13: Does your

institution have a CECL transition election in effect as of the quarter-end report date? An institution may make a one-time election to use the CECL transition provision, as described in section 301 of the regulatory capital rules. Such an institution is required to begin applying the CECL transition provision as of the institution’s CECL adoption date. An institution must indicate its election to use the CECL transition provision beginning in the quarter that it first reports its credit loss allowances in the Call Report as measured under CECL. An institution that does not elect to use the CECL transition provision in the quarter that it first reports its credit loss allowances in the Call Report as measured under CECL would not be permitted to make an election in subsequent reporting periods. For example, an institution that adopts CECL as of January 1, 2020, and does not elect to use the CECL transition provision in its Call Report for the March 31, 2020, report date would not be permitted to use the CECL transition provision in any subsequent reporting period.

An institution that has adopted CECL and has elected to apply the CECL transition provision must enter “1” for “Yes” in item 2.a for each quarter in which the institution uses the transition provisions. An institution that has adopted CECL and has elected not to use the CECL transition provision must enter a “0” for “No” in item 2.a. An institution that has not adopted CECL should leave item 2.a blank.

Each institution should complete item 2.a beginning in the quarter that it first reports its

credit loss allowances in the Call Report as measured under CECL and in each subsequent Call Report thereafter until item 2.a is removed from the report. Effective December 31, 2026, item 2.a, will be removed from Schedule RC-R, Part I, because the optional three-year phase-in period will have ended for all CECL electing institutions. If an individual CECL electing institution’s three-year phase-in period ends before item 2.a is removed (e.g., its phase-in period ends December 31, 2022), the institution would report “0” in item 2.a to indicate that it no longer has a CECL transition election in effect.

FFIEC 051 RC-R – REGULATORY CAPITAL

FFIEC 051 RC-R-7 RC-R – REGULATORY CAPITAL (6-20)

Part I. (cont.) General Instructions for Common Equity Tier 1 Capital: Adjustments and Deductions (cont.) (ii) The amount of DTLs that the institution nets against DTAs that arise from net operating loss and tax

credit carryforwards, net of any related valuation allowances, and against DTAs arising from temporary differences that the institution could not realize through net operating loss carrybacks, net of any related valuation allowances, must be allocated in proportion to the amount of DTAs that arise from net operating loss and tax credit carryforwards (net of any related valuation allowances, but before any offsetting of DTLs) and of DTAs arising from temporary differences that the institution could not realize through net operating loss carrybacks (net of any related valuation allowances, but before any offsetting of DTLs), respectively.

An institution may offset DTLs embedded in the carrying value of a leveraged lease portfolio acquired in a business combination that are not recognized under GAAP against DTAs that are subject to section 22(a) of the regulatory capital rules in accordance with section 22(e). An institution must net DTLs against assets subject to deduction in a consistent manner from reporting period to reporting period. An institution may change its DTL netting preference only after obtaining the prior written approval of the primary federal supervisor. In addition, note that even though certain deductions may be net of associated DTLs, the risk-weighted portion of those items may not be reduced by the associated DTLs. Item Instructions for Common Equity Tier 1 Capital: Adjustments and Deductions Item No. Caption and Instructions 6 LESS: Goodwill net of associated deferred tax liabilities (DTLs). Report the amount of

goodwill included in Schedule RC-M, item 2.b. However, if the institution has a DTL that is specifically related to goodwill that it chooses to

net against the goodwill, the amount of disallowed goodwill to be reported in this item should be reduced by the amount of the associated DTL.

7 LESS: Intangible assets (other than goodwill and mortgage servicing assets (MSAs)),

net of associated DTLs. Report all intangible assets (other than goodwill and MSAs) included in Schedule RC-M, item 2.c, that do not qualify for inclusion in common equity tier 1 capital based on the regulatory capital rules of the institution’s primary federal supervisor. Generally, all purchased credit card relationships (PCCRs), nonmortgage servicing assets, and all other intangibles reported in Schedule RC-M, item 2.c, do not qualify for inclusion in common equity tier 1 capital and should be included in this item.

However, if the institution has a DTL that is specifically related to an intangible asset (other

than goodwill and MSAs) that it chooses to net against the intangible asset for regulatory capital purposes, the amount of disallowed intangibles to be reported in this item should be reduced by the amount of the associated DTL. Furthermore, a DTL that the institution chooses to net against the related intangible reported in this item may not also be netted against DTAs that arise from net operating loss and tax credit carryforwards, net of any related valuation allowances, and DTAs that arise from temporary differences, net of any related valuation allowances, for regulatory capital purposes.

For state member banks, if the amount reported for other intangible assets in

Schedule RC-M, item 2.c, includes intangible assets that were recorded on the reporting bank's balance sheet on or before February 19, 1992, the remaining book value as of the report date of these intangible assets may be excluded from this item.

FFIEC 051 RC-R – REGULATORY CAPITAL

FFIEC 051 RC-R-8 RC-R – REGULATORY CAPITAL (6-20)

Part I. (cont.) Item No. Caption and Instructions 8 LESS: Deferred tax assets (DTAs) that arise from net operating loss and tax credit

carryforwards, net of any related valuation allowances and net of DTLs. Report the amount of DTAs that arise from net operating loss and tax credit carryforwards, net of associated valuation allowances and net of associated DTLs.

9 AOCI-related adjustments. Institutions that entered “1” for Yes in Schedule RC-R, Part I,

item 3.a, and are not yet required to adopt FASB Accounting Standards Update No. 2016-01 (ASU 2016-01), which includes provisions governing the accounting for investments in equity securities, including investment in mutual funds, and eliminates the concept of available-for-sale equity securities (see the Note preceding the instructions for Schedule RC, item 2.c) must complete Schedule RC-R, Part I, items 9.a through 9.e, only.

Institutions that entered “1” for Yes in Schedule RC-R, Part I, item 3.a, and are required to

have adopted ASU 2016-01 must complete Schedule RC-R, Part I, items 9.a and 9.c through 9.e, only.

Institutions that entered “0” for No in Schedule RC-R, Part I, item 3.a, must complete

Schedule RC-R, Part I, item 9.f, only. 9.a LESS: Net unrealized gains (losses) on available-for-sale securities. For institutions that entered “1” for Yes in Schedule RC-R, Part I, item 3.a, and are not yet

required to adopt ASU 2016-01 (as referenced in the instructions for item 9 above), report the amount of net unrealized gains (losses) on available-for-sale debt and equity securities, net of applicable income taxes, that is included in Schedule RC, item 26.b, “Accumulated other comprehensive income.” If the amount is a net gain, report it as a positive value in this item. If the amount is a net loss, report it as a negative value in this item.

For such institutions, include in this item net unrealized gains (losses) on available-for-sale

debt and equity securities reported in Schedule RC-B, items 1 through 7, columns C and D, and on those assets not reported in Schedule RC-B, that the bank accounts for like available-for-sale debt securities in accordance with applicable accounting standards (e.g., negotiable certificates of deposit and nonrated industrial development obligations).

For institutions that entered “1” for Yes in Schedule RC-R, Part I, item 3.a, and are required

to have adopted ASU 2016-01, report the amount of net unrealized gains (losses) on available-for-sale debt securities, net of applicable income taxes, that is included in Schedule RC, item 26.b, “Accumulated other comprehensive income.” If the amount is a net gain, report it as a positive value in this item. If the amount is a net loss, report it as a negative value in this item.

For such institutions, include in this item net unrealized gains (losses) on available-for-sale

debt securities reported in Schedule RC-B, items 1 through 6, columns C and D, and on those assets not reported in Schedule RC-B, that the bank accounts for like available-for-sale debt securities in accordance with applicable accounting standards (e.g., negotiable certificates of deposit and nonrated industrial development obligations).

NOTE: Schedule RC-R, Part I, item 9.b is to be completed only by institutions that entered “1” for Yes in Schedule RC-R, Part I, item 3.a, and are not yet required to adopt ASU 2016-01 (as referenced in the instructions for Schedule RC-R, Part I, item 9, above). Institutions that entered “1” for Yes in Schedule RC-R, Part I, item 3.a, and are required to have adopted ASU 2016-01 should leave Schedule RC-R, Part I, item 9.b, blank.

FFIEC 051 RC-R – REGULATORY CAPITAL

FFIEC 051 RC-R-17 RC-R – REGULATORY CAPITAL (6-20)

Part I. (cont.) Item No. Caption and Instructions 22 Tier 1 minority interest not included in common equity tier 1 capital. Report the amount

of tier 1 minority interest not included in common equity tier 1 capital that is includable at the consolidated level, calculated as described below and in section 21 of the regulatory capital rules.

Non-advanced approaches institutions are able to include tier 1 minority interest up to 10

percent of the parent banking organization’s tier 1 capital. The 10 percent limitation is measured before the inclusion of any minority interest and after the deductions from and adjustments to the regulatory capital of the parent banking organization described in sections 22(a) and (b) of the regulatory capital rules. Tier 1 minority interest is the portion of tier 1 capital in a reporting institution’s subsidiary not attributable, directly or indirectly, to the parent institution. Note that an institution may only include tier 1 minority interest if the capital instruments issued by the subsidiary meet all of the criteria for tier 1 capital (qualifying tier 1 capital instruments).

Example and a worksheet calculation: Calculate tier 1 minority interest not included in

common equity tier 1 minority interest includable at the reporting institution’s level as follows: Assumptions:

• This is a continuation of the example used in the instructions for Schedule RC-R, Part I, item 4.

• Assumptions and calculation from Schedule RC-R, Part I, item 4: o The parent banking organization’s common equity tier 1 before minority interest and

common equity tier 1 capital adjustments and deductions is $100. o Common equity tier 1 capital adjustments and deductions is $10.

• The parent banking organization’s additional tier 1 capital instruments before minority interest and additional tier 1 deductions equal $15.

• Additional tier 1 capital deductions equal $4. • Subsidiary A has $6 of additional tier 1 minority interest (that is, owned by minority

shareholders). • Subsidiary B has $6 of additional tier 1 minority interest (that is, owned by minority

shareholders). • The subsidiary’s tier 1 minority interest (that is, owned by minority shareholders) is $24

($12 of common equity tier 1 minority interest and $12 of minority interest in the form of additional tier 1 instruments).

(1) Common equity tier 1 capital before CET1 minority interest + Additional tier

1 capital instruments before minority interest - additional tier 1 capital deductions = Schedule RC-R, Part I, sum of items 19, 20, and 21, minus item 4 minus item 24.

$90+$15-$4=$101

(2) Multiply step (1) by 10 percent. This is the maximum includable tier 1 minority interest from all subsidiaries.

$101 x 10% = $10.1

(3) Determine the lower of (2) or the tier 1 minority interest from all subsidiaries.

Minimum of ($10.1 from Step 2 or $24 from the assumptions) = $10.1

(4) From (3), subtract out the common equity tier 1 minority interest reported in Schedule RC-R, Part I, item 4. This is the “tier 1 minority interest not included in common equity tier 1 minority interest includable at the reporting institution’s level” to be included in Schedule RC-R, Part I, item 22.

$10.1 - $9 = $1.1

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Part I. (cont.) Item No. Caption and Instructions 23 Additional tier 1 capital before deductions. Report the sum of Schedule RC-R, Part I,

items 20, 21, and 22. 24 LESS: Additional tier 1 capital deductions. Report additional tier 1 capital deductions as

the sum of the following elements. Note that an institution should report additional tier 1 capital deductions in this item 24

irrespective of the amount of additional tier 1 capital before deductions reported in Schedule RC-R, Part I, item 23. If an institution does not have a sufficient amount of additional tier 1 capital before deductions in item 23 to absorb these deductions, then the institution must deduct the shortfall from common equity tier 1 capital in Schedule RC-R, Part I, item 17. For example, if an institution reports $0 of “Additional tier 1 capital before deductions” in Schedule RC-R, Part I, item 23, and has $100 of additional tier 1 capital deductions, the institution would report $100 in this item 24, add $100 to the amount to be reported in Schedule RC-R, Part I, item 17, and report $0 in Schedule RC-R, Part I, item 25, “Additional tier 1 capital.”

(1) Investments in own additional tier 1 capital instruments. Report the institution’s

investments in (including any contractual obligation to purchase) its own additional tier 1 capital instruments, whether held directly or indirectly.

An institution may deduct gross long positions net of short positions in the same

underlying instrument only if the short positions involve no counterparty risk. The institution must look through any holdings of index securities to deduct investments

in its own capital instruments. In addition: (i) Gross long positions in investments in an institution’s own regulatory capital

instruments resulting from holdings of index securities may be netted against short positions in the same index;

(ii) Short positions in index securities that are hedging long cash or synthetic positions can be decomposed to recognize the hedge; and

(iii) The portion of the index that is composed of the same underlying exposure that is being hedged may be used to offset the long position if both the exposure being hedged and the short position in the index are covered positions under the market risk capital rule, and the hedge is deemed effective by the institution’s internal control processes.

(2) Reciprocal cross-holdings in the capital of financial institutions. Include investments

in the additional tier 1 capital instruments of other financial institutions that the institution holds reciprocally, where such reciprocal cross-holdings result from a formal or informal arrangement to swap, exchange, or otherwise intend to hold each other’s capital instruments. If the institution does not have a sufficient amount of a specific component of capital to effect the required deduction, the shortfall must be deducted from the next higher (that is, more subordinated) component of regulatory capital.

For example, if an institution is required to deduct a certain amount from additional tier 1

capital and it does not have additional tier 1 capital, then the deduction should be from common equity tier 1 capital in Schedule RC-R, Part I, item 17.

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Part I. (cont.) Item No. Caption and Instructions 24 (3) Investments in the capital of unconsolidated financial institutions that exceed the (cont.) 25 percent threshold to be deducted from additional tier 1 capital. Report the total

amount of investments in the capital of unconsolidated financial institutions in the form of additional tier 1 capital that exceeds the 25 percent threshold. Calculate this amount as follows:

(1) Determine the amount of investments in the capital of unconsolidated financial

institutions, net of associated DTLs. (2) If the amount in (1) is greater than 25 percent of Schedule RC-R, Part I, item 12,

report the difference across items 13, 24, or 43, depending on the tier of capital for which the investments in the capital of unconsolidated financial institutions qualify. The institution can elect which investments it must deduct and which it must risk weight. Depending on the institution’s election and the component of capital for which the underlying instrument would qualify will determine if it will be deducted and reported in Schedule RC-R, Part I, item 13, or be deducted and reported in Schedule RC-R, Part I, item 24 or 43.

(3) If the amount in (1) is less than 25 percent of Schedule RC-R, Part I, item 12, no deduction is needed.

See Schedule RC-R, Part I, item 13, for an example of how to deduct amounts of

investments in the capital of unconsolidated financial institutions that exceed the 25 percent threshold.

Since the community bank leverage ratio framework does not have a total capital

requirement, a CBLR electing institution is neither required to calculate tier 2 capital nor make any deductions that would have been taken from tier 2 capital under the generally applicable rule. Therefore, if a CBLR electing institution has investments in the capital instruments of an unconsolidated financial institution that would qualify as tier 2 capital of the CBLR electing institution under the generally applicable rule (tier 2 qualifying investments), and the institution’s total investments in the capital of unconsolidated financial institutions exceed the threshold for deduction, the institution is not required to deduct the tier 2 qualifying investments.

(4) Other adjustments and deductions. Include adjustments and deductions applied to

additional tier 1 capital due to insufficient tier 2 capital to cover deductions (related to reciprocal cross-holdings and investments in the tier 2 capital of unconsolidated financial institutions).

CBLR eligible institutions that opt into the community bank leverage ratio framework are

not required to calculate tier 2 capital and would not be required to make any deductions that would be taken from tier 2 capital.

In addition, insured state banks with real estate subsidiaries whose continued operations

have been approved by the FDIC pursuant to Section 362.4 of the FDIC's Rules and Regulations generally should include as a deduction from additional tier 1 capital their equity

investment in the subsidiary. (Insured state banks with FDIC-approved phase-out plans for real estate subsidiaries need not make these deductions.) Insured state banks with other subsidiaries (that are not financial subsidiaries) whose continued operations have been approved by the FDIC pursuant to Section 362.4 should include as a deduction from additional Tier 1 capital the amount required by the approval order.

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Part I. (cont.) Item No. Caption and Instructions 25 Additional tier 1 capital. Report the greater of Schedule RC-R, Part I, item 23 minus

item 24, or zero. Tier 1 Capital 26 Tier 1 capital. Report the sum of Schedule RC-R, Part I, items 19 and 25. Total Assets for the Leverage Ratio 27 Average total consolidated assets. All institutions must report the amount of average total

consolidated assets as reported in Schedule RC-K, item 9. An institution that has adopted FASB Accounting Standards Update No. 2016-13, which

governs the accounting for credit losses and introduces the current expected credit losses methodology (CECL), and has elected to apply the 3-year CECL transition provision (3-year CECL electing institution) should increase its average total consolidated assets by its applicable CECL transitional amount, in accordance with section 301(c)(1)(iv) of the regulatory capital rules. For example, a 3-year CECL electing institution should increase its average total consolidated assets as reported on the Call Report for purposes of the leverage ratio by 75 percent of its CECL transitional amount during the first year of the transition period, 50 percent of its CECL transitional amount during the second year of the transition period, and 25 percent of its CECL transitional amount during the third year of the transition period (see Table 1 in the instructions for Schedule RC-R, Part I, item 2).

28 LESS: Deductions from common equity tier 1 capital and additional tier 1 capital. Report the sum of the amounts deducted from common equity tier 1 capital and additional

tier 1 capital in Schedule RC-R, Part I, items 6, 7, 8, 10.b, 13 through 15, 17, and 24. Also exclude the amount reported in Schedule RC-R, Part I, item 17, that is due to insufficient amounts of additional tier 1 capital, and which is included in the amount reported in Schedule RC-R, Part I, item 24. (This is to avoid double counting.)

29 LESS: Other deductions from (additions to) assets for leverage ratio purposes. Based

on the regulatory capital rules of the bank’s primary federal supervisor, report the amount of any deductions from (additions to) total assets for leverage ratio purposes that are not included in Schedule RC-R, Part I, item 28, as well as the items below, if applicable. If the amount is a net deduction, report it as a positive value in this item. If the amount is a net addition, report it as a negative value in this item.

Institutions that make the AOCI opt-out election in Schedule RC-R, Part I, item 3.a –

Defined benefit postretirement plans: If the reporting institution sponsors a single-employer defined benefit postretirement plan,

such as a pension plan or health care plan, accounted for in accordance with ASC Topic 715, Compensation-Retirement Benefits (formerly FASB Statement No. 158, “Employers’

Accounting for Defined Benefit Pension and Other Postretirement Plans”), the institution should adjust total assets for leverage ratio purposes for any amounts included in Schedule RC, item 26.b, “Accumulated other comprehensive income” (AOCI), affecting assets as a result of the initial and subsequent application of ASC Topic 715. The adjustment also should take into account subsequent amortization of these amounts from

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Part I. (cont.) Item No. Caption and Instructions 29 AOCI into earnings. The intent of the adjustment reported in this item (together with the (cont.) amount reported in Schedule RC-R, Part I, item 9.d) is to reverse the effects on AOCI of

applying ASC Topic 715 for regulatory capital purposes. Specifically, assets recognized or derecognized as an adjustment to AOCI as part of the incremental effect of applying ASC Topic 715 should be reported as an adjustment to total assets for leverage ratio purposes. For example, the derecognition of an asset recorded as an offset to AOCI as part of the initial incremental effect of applying ASC Topic 715 should be added back to total assets for leverage ratio purposes by reporting the amount as a negative number in this item. As another example, the portion of a benefit plan surplus asset that is included in Schedule RC, item 26.b, as an increase to AOCI and in total assets should be deducted from total assets for leverage ratio purposes by reporting the amount as a positive number in this item.

Institutions that do not make the AOCI opt-out election – Available-for-sale securities: Available-for-sale debt securities and available-for-sale equity securities are reflected at

amortized cost and at the lower of cost or fair value, respectively, when calculating average total consolidated assets for Schedule RC-K, item 9. Therefore, include in this item as deductions from (additions to) assets for leverage ratio purposes the amounts needed to adjust (i) the quarterly average for available-for-sale debt securities included in Schedule RC-K, item 9, from an average based on amortized cost to an average based on fair value, and (ii) the quarterly average for available-for-sale equity securities included in Schedule RC-K, item 9, from an average based on the lower of cost or fair value to an average based on fair value. If the deferred tax effects of any net unrealized gains (losses) on available-for-sale debt securities were excluded from the determination of average total consolidated assets for Schedule RC-K, item 9, also include in this item as a deduction from (addition to) assets for leverage ratio purposes the quarterly average amount necessary to reverse the effect of this exclusion on the quarterly average amount of net deferred tax assets included in Schedule RC-K, item 9.

Financial Subsidiaries: If a financial subsidiary is not consolidated into the bank for purposes of the bank’s balance

sheet, include in this item 29 as a deduction from the bank’s average total assets (as reported in Schedule RC-R, Part I, item 27) the quarterly average for the bank's ownership interest in the financial subsidiary accounted for under the equity method of accounting that is included in the bank’s average total assets reported in Schedule RC-K, item 9.

If a financial subsidiary is consolidated into the bank for purposes of the bank’s balance

sheet, include in this item 29 as a deduction from the bank’s average total assets (as reported in Schedule RC-R, Part I, item 27) the quarterly average of the assets of the subsidiary that have been included in the bank’s consolidated average total assets reported in Schedule RC-K, item 9; minus any deductions from common equity tier 1 capital and additional tier 1 capital attributable to the financial subsidiary that have been included in Schedule RC-R, Part I, item 28; and plus the quarterly average of bank assets representing claims on the financial subsidiary, other than the bank’s ownership interest in the subsidiary, that were eliminated in consolidation. Because the bank’s claims on the subsidiary were eliminated in consolidation, these bank assets were not included in the bank’s consolidated average total assets reported in Schedule RC-K, item 9.

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Part I. (cont.) Item No. Caption and Instructions 29 Non-Includable Subsidiaries: (cont.)

A savings association with a non-includable subsidiary should include in this item 29 a deduction from average total assets (as reported in Schedule RC-R, Part I, item 27) determined in the same manner as described above for financial subsidiaries, except that for a non-includable subsidiary accounted for under the equity method of accounting, the deduction should be the quarterly average for the savings association’s outstanding investments (both equity and debt) in, and extensions of credit to, the subsidiary.

30 Total assets for the leverage ratio. Report Schedule RC-R, Part I, item 27, less items 28

and 29. Leverage Ratio 31 Leverage ratio. Report the institution’s leverage ratio as a percentage, rounded to four

decimal places. Divide Schedule RC-R, Part I, item 26 by item 30. 31.a Does your institution have a community bank leverage ratio (CBLR) framework

election in effect as of the quarter-end report date? Enter “1” for Yes or enter “0” for No. Refer to the qualifying criteria for using the CBLR

framework, which are explained in the instructions for Schedule RC-R, Part I, items 32 through 34, below.

Qualifying Criteria and Other Information for CBLR Institutions Schedule RC-R, Part I, items 32 through 37 and, if applicable, items 38.a through 38.c, are to be completed only by qualifying institutions that have elected to adopt the community bank leverage ratio (CBLR) framework or are within the grace period as of the quarter-end report date. (For further information on the grace period, see the General Instructions for Part I.) If your institution entered “1” in item 31.a, then items 32 through 37 and, if applicable, items 38.a through 38.c, must be completed. Institutions that do not qualify for or have not adopted the community bank leverage ratio framework as of the quarter-end report date should leave items 32 through 38.c blank and go to Schedule RC-R, Part I, item 39. A qualifying institution can opt out of the community bank leverage ratio framework by completing Schedule RC-R, Parts I and II, excluding Schedule RC-R, Part I, items 32 through 38.c. 32 Total assets. Report total assets from Schedule RC, item 12. A bank’s total assets must be

less than $10 billion as part of the qualifying criteria for the CBLR framework. 33 Trading assets and trading liabilities. Report in column A the sum of trading assets from

Schedule RC, item 5, and trading liabilities from Schedule RC, item 15 (i.e., added, not netted).

Report in column B the sum of trading assets and trading liabilities as a percentage of total

assets by dividing the amount of trading assets and trading liabilities reported in column A of this item by total assets reported in Schedule RC-R, Part I, item 32, above, rounded to four decimal places. The percentage reported in this item must be 5 percent or less of total assets as part of the qualifying criteria for the CBLR framework.

34 Off-balance sheet exposures. Report in the appropriate subitem the specified off-balance

sheet exposure amounts.

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Part I. (cont.) Item No. Caption and Instructions 38 broader range of assets than the PCI asset definition. As defined in ASU 2016-13, (cont.) “purchased credit-deteriorated assets” are acquired individual financial assets (or acquired

groups of financial assets with similar risk characteristics) accounted for in accordance with ASC Topic 326, Financial Instruments‒Credit Losses, that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by the acquiring institution’s assessment.

ASU 2016-13 requires institutions to estimate and record a credit loss allowance for a PCD

asset at the time of purchase. The credit loss allowance is then added to the purchase price to determine the amortized cost basis of the asset for financial reporting purposes. Post-acquisition increases in credit loss allowances on PCD assets will be established through a charge to earnings. This accounting treatment for PCD assets is different from the current treatment of PCI assets, for which institutions are not permitted to estimate and recognize credit loss allowances at the time of purchase. Rather, in general, credit loss allowances for PCI assets are estimated subsequent to the purchase only if there is deterioration in the expected cash flows from the assets.

38.a Loans and leases held for investment. Report all allowances for credit losses on PCD

loans and leases held for investment. 38.b Held-to-maturity debt securities. Report all allowances for credit losses on PCD held-to-

maturity debt securities. 38.c Other financial assets measured at amortized cost. Report all allowances for credit

losses on all other PCD financial assets, excluding PCD loans and leases held for investment, held-to-maturity debt securities, and available-for-sale debt securities.

NOTE: A qualifying institution that has a community bank leverage ratio (CBLR) framework election in effect as of the quarter-end report date (i.e., entered “1” for Yes in Schedule RC-R, Part I, item 31.a) should not complete Schedule RC-R, Part I, items 39 through 54, and should not complete Schedule RC-R, Part II. Tier 2 Capital 39 Tier 2 capital instruments plus related surplus. Report the portion of cumulative perpetual

preferred stock and related surplus included in Schedule RC, item 23; the portion of subordinated debt and limited-life preferred stock and related surplus included in Schedule RC, item 19; and any other capital instrument and related surplus that satisfy all the eligibility criteria for tier 2 capital instruments in section 20(d) of the regulatory capital rules of the institution’s primary federal supervisor.

Include instruments that (i) were issued under the Small Business Jobs Act of 2010, or, prior

to October 4, 2010, under the Emergency Economic Stabilization Act of 2008 and (ii) were included in the tier 2 capital non-qualifying capital instruments (e.g., trust preferred stock and cumulative perpetual preferred stock) under the primary federal supervisor’s general risk-based capital rules.

40 Non-qualifying capital instruments subject to phase-out from tier 2 capital. Report

the total amount of non-qualifying capital instruments that were included in tier 2 capital and outstanding as of January 1, 2014, and that are subject to phase-out.

Depository institutions may include in regulatory capital debt or equity instruments issued

prior to September 12, 2010, that do not meet the criteria for additional tier 1 or tier 2 capital

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Part I. (cont.) Item No. Caption and Instructions 40 instruments in section 20 of the regulatory capital rules but that were included in tier 1 or (cont.) tier 2 capital respectively as of September 12, 2010 (non-qualifying capital instruments issued

prior to September 12, 2010) up to the percentage of the outstanding principal amount of such non-qualifying capital instruments as of January 1, 2014, in accordance with Table 2 in the instructions for Schedule RC-R, item 21.

41 Total capital minority interest that is not included in tier 1 capital. Report the aggregate

amount of total capital minority interest, calculated as described below and in section 21 of the regulatory capital rules. Non-advanced approaches institutions are able to include total capital minority interest up to 10 percent of the parent banking organization’s total capital. The 10 percent limitation is measured before the inclusion of any minority interest and after the deductions from and adjustments to the regulatory capital of the parent banking organization described in sections 22(a) and (b) of the capital rule. Total capital minority interest is the portion of total capital in a reporting institution’s subsidiary not attributable, directly or indirectly, to the parent institution. Note that a reporting institution may only include total capital minority interest if the capital instruments issued by the subsidiary meet all of the criteria for capital (qualifying capital instruments).

Example and a worksheet calculation: Calculate total capital minority interest includable at

the reporting institution’s level as follows: Assumptions:

• This is a continuation of the example used in the instructions for Schedule RC-R, Part I, items 4 and 22.

• Assumptions and calculation from Schedule RC-R, Part I, item 4: o Includable common equity tier 1 minority interest (see Schedule RC-R, Part I, item 4)

is $9. o The parent banking organization’s common equity tier 1 capital before minority

interest and after deductions and adjustments is $90. • Assumptions and calculation from Schedule RC-R, Part I, item 22:

o Includable tier 1 minority interest that is not included in common equity tier 1 minority interest (see Schedule RC-R, Part I, item 22) is $1.1.

o The parent banking organization’s additional tier 1 capital before minority interest and after deductions is $11 ($15 - $4).

• The parent banking organization’s tier 2 capital instruments before minority interest and allowance for loan and lease losses includable in tier 2 capital (or adjusted allowances for credit losses (AACL), as applicable) is $20. Additional tier 2 capital deductions equal $2.

• The subsidiary’s total capital minority interest (that is, owned by minority shareholders) is $14.

• Subsidiary A has $8 of minority interest in the form of tier 2 instruments (that is, owned by minority shareholders).

• Subsidiary B has $6 of minority interest in the form of tier 2 instruments (that is, owned by minority shareholders).

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Part I. (cont.) Item No. Caption and Instructions 41 (cont.)

(1) Tier 1 capital after deductions and before minority interest + tier 2 capital instruments before minority interest + allowance for loan and lease losses (ALLL) or adjusted allowances for credit losses (AACL), as applicable, for regulatory capital purposes that is includable in tier 2 capital - tier 2 capital deductions = Schedule RC-R, Part I, sum of items 26, 39, 40, and 42.a, minus item 45.

$101 + $20 -$2 = $119

(2) Multiply step (1) by 10 percent. This is the maximum includable total capital minority interest from all subsidiaries.

$119 x 10% = $11.9

(3) Determine the lower of (2) or the total capital minority interest from all subsidiaries.

Minimum of ($11.9 from Step 2 or $38 from the assumptions) = $11.9

(4) From (3), subtract out the includable common equity tier 1 minority interest reported in Schedule RC-R, Part I, item 4, and includable tier 1 minority interest that is not included in common equity tier 1 minority interest reported in Schedule RC-R, Part I, item 22. This is the “total capital minority interest not included in tier 1 minority interest includable at the reporting institution’s level” to be included in Schedule RC-R, Part I, item 41.

$11.9 - $9 - $1.1 = $1.8

42 Allowance for loan and lease losses includable in tier 2 capital. Report the portion of

the institution’s allowance for loan and lease losses (ALLL) or adjusted allowances for credit losses (AACL), as applicable, for regulatory capital purposes that is includable in tier 2 capital. None of the institution’s allocated transfer risk reserve, if any, is includable in tier 2 capital.

For an institution that has not adopted FASB Accounting Standards Update No. 2016-13

(ASU 2016-13), which governs the accounting for credit losses and introduces the current expected credit losses methodology (CECL), the institution’s ALLL for regulatory capital purposes equals Schedule RC, item 4.c, “Allowance for loan and lease losses”; less any allocated transfer risk reserve included in Schedule RC, item 4.c; plus Schedule RC-G, item 3, “Allowance for credit losses on off-balance sheet credit exposures.”

For an institution that has adopted ASU 2016-13, the institution’s AACL for regulatory capital

purposes equals Schedule RI-B, Part II, item 7, columns A and B, “Balance end of current period” for loans and leases held for investment and held-to-maturity debt securities, respectively; plus Schedule RI-B, Part II, Memorandum item 6, “Allowance for credit losses on other financial assets measured at amortized cost (not included in item 7, above)”; less Schedule RC-R, Part II, sum of Memorandum items 4.a, 4.b, and 4.c, “Amount of allowances for credit losses on purchased credit-deteriorated assets” for loans and leases held for investment, held-to-maturity debt securities, and other financial assets measured at amortized cost, respectively; less any allocated transfer risk reserve included in Schedule RI-B, Part II, item 7, columns A and B, and Memorandum item 6; plus Schedule RC-G, item 3, ‘‘Allowance for credit losses on off-balance sheet credit exposures.’’

An institution that has adopted ASU 2016-13 and has elected to apply the 3-year CECL

transition provision (3-year CECL electing institution) should decrease its applicable AACL transitional amount

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Part I. (cont.) Item No. Caption and Instructions 42 in accordance with section 301 of the regulatory capital rules. Specifically, a 3-year CECL (cont.) electing institution should reduce the amount of its AACL includable in tier 2 capital by

75 percent of its AACL transitional amount during the first year of the transition period, 50 percent of its AACL transitional amount during the second year of the transition period, and 25 percent of its AACL transitional amount during the third year of the transition period (see Table 1 in the instructions for Schedule RC-R, Part I, item 2).

The amount to be reported in this item is the lesser of (1) the institution’s ALLL or AACL,

as applicable, for regulatory capital purposes, as defined above, or (2) 1.25 percent of the institution’s risk-weighted assets base for the ALLL or AACL calculation, as applicable, as reported in Schedule RC-R, Part II, item 26. In calculating the risk-weighted assets base for this purpose, an institution would not include items that are deducted from capital under section 22(a). However, an institution would include risk-weighted asset amounts of items deducted from capital under sections 22(c) through (f) of the regulatory capital rule. While amounts deducted from capital under sections 22(c) through (f) are included in the risk-weighted assets base for the ALLL or AACL calculation, as applicable, such amounts are excluded from standardized total risk-weighted assets used in the denominator of the risk-based capital ratios.

The amount, if any, by which an institution’s ALLL or AACL, as applicable, for regulatory

capital purposes exceeds 1.25 percent of the institution’s risk-weighted assets base for the ALLL or AACL calculation (as reported in Schedule RC-R, Part II, item 26), as applicable, should be reported in Schedule RC-R, Part II, item 29, “LESS: Excess allowance for loan and lease losses.” For an institution that has not adopted ASU 2016-13, the sum of the amount of ALLL includable in tier 2 capital reported in Schedule RC-R, Part I, item 42, plus the amount of excess ALLL reported in Schedule RC-R, Part II, item 29, must equal Schedule RC, item 4.c, less any allocated transfer risk reserve included in Schedule RC, item 4.c, plus Schedule RC-G, item 3.

NOTE: Schedule RC-R, Part I, item 43, is to be completed only by institutions that are not yet required to adopt FASB Accounting Standards Update No. 2016-01 (ASU 2016-01), which includes provisions governing the accounting for investments in equity securities, including investment in mutual funds, and eliminates the concept of available-for-sale equity securities (see the Note preceding the instructions for Schedule RC, item 2.c). Institutions that are required to have adopted ASU 2016-01 should leave Schedule RC-R, Part I, item 43, blank. 43 Unrealized gains on available-for-sale preferred stock classified as an equity security

under GAAP and available-for-sale equity exposures includable in tier 2 capital. (i) Institutions that entered “1” for “Yes" in Schedule RC-R, Part I, item 3.a: Report the pretax net unrealized holding gain (i.e., the excess of fair value as reported in

Schedule RC-B, item 7, column D, over historical cost as reported in Schedule RC-B, item 7, column C), if any, on available-for-sale preferred stock classified as an equity security under GAAP and available-for-sale equity exposures includable in tier 2 capital, subject to the limit in section 20(d) of the regulatory capital rules. The amount to be reported in this item equals 45 percent of the institution’s pretax net unrealized gains on available-for-sale preferred stock classified as an equity security under GAAP and available-for-sale equity exposures.

(ii) Institutions that entered “0” for “No” in Schedule RC-R, Part I, item 3.a, should

report a zero in this item 43.

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Part I. (cont.) Capital Buffer Item No. Caption and Instructions 52 Institution-specific capital conservation buffer necessary to avoid limitations on

distributions and discretionary bonus payments. In order to avoid limitations on distributions, including dividend payments, and certain discretionary bonus payments to executive officers, an institution must hold a capital conservation buffer above its minimum risk-based capital requirements.

Report the institution’s capital conservation buffer as a percentage, rounded to four decimal

places. Except as described below, the capital conservation buffer is equal to the lowest of ratios (1), (2), and (3) below.

For example, the capital conservation buffer to be reported in this item 52 for the June 30,

2020, report date would be based on the capital ratios reported in Schedule RC-R, Part I, of the Call Report for June 30, 2020.

(1) Schedule RC-R, Part I, item 49, less 4.5000 percent, which is the minimum common

equity tier 1 capital ratio requirement under section 10 of the regulatory capital rules; (2) Schedule RC-R, Part I, item 50, less 6.0000 percent, which is the minimum tier 1 capital

ratio requirement under section 10 of the regulatory capital rules; and (3) Schedule RC-R, Part I, item 51, less 8.0000 percent, which is the minimum total capital

ratio requirement under section 10 of the regulatory capital rules. However, if any of the three ratios calculated above is less than zero (i.e., is negative), the

institution’s capital conservation buffer is zero. NOTE: Institutions must complete Schedule RC-R, Part I, item 53, only if the amount reported in Schedule RC-R, Part I, item 52, above, is less than or equal to 2.5000 percent. Item No. Caption and Instructions 53 Eligible retained income. Report the amount of eligible retained income as the net income

attributable to the institution for the four calendar quarters preceding the current calendar quarter, net of any distributions and associated tax effects not already reflected in net income. (See the instructions for Schedule RC-R, Part I, item 54, for the definition of “distributions” from section 2 of the regulatory capital rules.)

For example, the amount of eligible retained income to be reported in this item 53 for the

December 31, 2019, report date would be based on the net income attributable to the institution for the four calendar quarters ending on December 31, 2019. This net income amount would equal the net income attributable to the institution most recently reported in Schedule RI, item 14, for December 31, 2019 (i.e., after adjustments for amended Consolidated Reports of Income).

This net income amount would next be reduced by any distributions and associated tax

effects not already reflected in net income; the resulting amount would be the eligible retained income to be reported in this item 53. Thus, if the institution had declared dividends on its

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Part I. (cont.) Item No. Caption and Instructions 53 common stock during each calendar quarter in 2019 and had no other distributions during (cont.) 2019, the institution would reduce its net income amount by the total amount of the dividends

declared in 2019 and report the resulting amount as its eligible net income in this item 53. As an additional example, the amount of eligible retained income to be reported in this

item 53 for the March 31, 2020, report date would be based on the net income attributable to the institution for the four calendar quarters ending on March 31, 2020. This net income amount would be calculated by:

(1) Subtracting the net income attributable to the institution most recently reported in

Schedule RI, item 14, for March 31, 2019 (i.e., after adjustments for amended Consolidated Reports of Income), from the net income attributable to the institution most recently reported in Schedule RI, item 14, for December 31, 2019 (i.e., after adjustments for amended Consolidated Reports of Income), and

(2) Adding the result from (1) above to the net income attributable to the institution most recently reported in Schedule RI, item 14, for March 31, 2020 (i.e., after adjustments for amended Consolidated Reports of Income).

This net income amount would next be reduced by any distributions and associated tax

effects not already reflected in net income (e.g., dividends declared on the institution’s common stock between April 1, 2019, and March 31, 2020); the resulting amount would be the eligible retained income to be reported in this item 53.

NOTE: Institutions must complete Schedule RC-R, Part I, item 54, only if the amount reported in Schedule RC-R, Part I, item 52, in the Call Report for the previous calendar quarter-end report date was less than or equal to 2.5000 percent. Item No. Caption and Instructions 54 Distributions and discretionary bonus payments during the quarter. An institution must

complete this item only if the amount of its capital conservation buffer, as reported as of the previous calendar quarter-end report date, was less than its applicable required buffer percentage on that previous calendar quarter-end report date. For an institution that must complete this item 54, report the amount of distributions and discretionary bonus payments during the calendar quarter ending on the report date.

For example, an institution must report the amount of distributions and discretionary bonus

payments made during the calendar quarter ending June 30, 2020, in this item 54 in its June 30, 2020, Call Report only if the amount of its capital conservation buffer as reported in Schedule RC-R, Part I, item 52, in its March 31, 2020, Call Report was less than or equal to 2.5000 percent.

As defined in section 2 of the regulatory capital rules, “distribution” means: (1) A reduction of tier 1 capital through the repurchase of a tier 1 capital instrument or by

other means, except when an institution, within the same quarter when the repurchase is announced, fully replaces a tier 1 capital instrument it has repurchased by issuing another capital instrument that meets the eligibility criteria for:

(i) A common equity tier 1 capital instrument if the instrument being repurchased was part of the institution's common equity tier 1 capital, or

(ii) A common equity tier 1 or additional tier 1 capital instrument if the instrument being repurchased was part of the institution's tier 1 capital;

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Part II. Risk-Weighted Assets These instructions exclude updates pertaining to the regulatory capital-related interim final rules (IFRs) issued by the banking agencies from March through June 2020. See the separate standalone June 2020 COVID-19 Related Supplemental Instructions (Call Report) for instructional changes related to these IFRs.

Contents – Part II. Risk-Weighted Assets

Community Bank Leverage Ratio Framework RC-R-36

General Instructions for Schedule RC-R, Part II RC-R-36

Exposure Amount Subject to Risk Weighting RC-R-37

Amounts to Report in Column B RC-R-38

Treatment of Collateral and Guarantees RC-R-38a

a. Collateralized Transactions RC-R-38a

b. Guarantees and Credit Derivatives RC-R-39

Treatment of Equity Exposures RC-R-40

Treatment of Sales of 1-4 Family Residential First Mortgage Loans with Credit-Enhancing Representations and Warranties RC-R-42

Treatment of Exposures to Sovereign Entities and Foreign Banks RC-R-42

Summary of Risk Weights for Exposures to Government and Public Sector Entities RC-R-43

Risk-Weighted Assets for Securitization Exposures RC-R-44

a. Exposure Amount Calculation RC-R-44

b. Simplified Supervisory Formula Approach RC-R-45

c. Gross-Up Approach RC-R-47

d. 1,250 Percent Risk Weight Approach RC-R-49

Banks That Are Subject to the Market Risk Capital Rule RC-R-50

Adjustments for Financial Subsidiaries RC-R-51

Treatment of Embedded Derivatives RC-R-51

Reporting Exposures Hedged with Cleared Eligible Credit Derivatives RC-R-51

Treatment of Certain Centrally Cleared Derivative Contracts RC-R-52

Treatment of FDIC Loss-Sharing Agreements RC-R-52

Allocated Transfer Risk Reserve (ATRR) RC-R-52

Item Instructions for Schedule RC-R, Part II RC-R-53

Balance Sheet Asset Categories RC-R-53 Securitization Exposures: On- and Off-Balance Sheet RC-R-83

Total Assets RC-R-89

Derivatives, Off-Balance Sheet Items, and Other Items Subject To Risk Weighting (Excluding Securitization Exposures) RC-R-90

Totals RC-R-109

Memoranda RC-R-111

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Part II. (cont.) Community Bank Leverage Ratio Framework A qualifying community banking organization that decides to opt into the community bank leverage ratio (CBLR) framework (i.e., has a CBLR framework election in effect as of the quarter-end report date, as reported in Schedule RC-R, Part I, item 31.a) should not complete Schedule RC-R, Part II. All other institutions should complete Schedule RC-R, Part II. A qualifying institution can opt out of the community bank leverage ratio framework by completing Schedule RC-R, Parts I and II, excluding Schedule RC-R, Part I, items 32 through 38.c. Please refer to the General Instructions for Schedule RC-R, Part I, for information on the reporting requirements that apply when an institution ceases to have a leverage ratio greater than 9 percent or fails to meet any of the qualifying criteria and is no longer in the grace period. General Instructions for Schedule RC-R, Part II. NOTE: Schedule RC-R, Part II, items 1 through 25, columns A through U, as applicable, are to be completed semiannually in the June and December reports only. Items 26 through 31 are to be completed quarterly. The instructions for Schedule RC-R, Part II, items 1 through 22, provide general directions for the allocation of bank balance sheet assets, credit equivalent amounts of derivatives and off-balance sheet items, and unsettled transactions to the risk-weight categories in columns C through Q (and, for items 1 through 10 only, to the adjustments to the totals in Schedule RC-R, Part II, column A, to be reported in column B). In general, the aggregate amount allocated to each risk-weight category is then multiplied by the risk weight associated with that category. The resulting risk-weighted values from each of the risk categories are added together, and generally this sum is the bank's total risk-weighted assets, which comprises the denominator of the risk-based capital ratios. These instructions should provide sufficient guidance for most banks for risk-weighting their balance sheet assets and credit equivalent amounts. However, these instructions do not address every type of exposure. Banks should review the regulatory capital rules of their primary federal supervisory authority for the complete description of capital requirements.

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Part II. (cont.) General Instructions for Schedule RC-R, Part II. (cont.) Exposure Amount Subject to Risk Weighting In general, banks need to risk weight the exposure amount. The exposure amount is defined in §.2 of the regulatory capital rules as follows: (1) For the on-balance sheet component of an exposure,1 the bank’s carrying value2 of the exposure. (2) For a security3 classified as AFS or HTM where the bank has made the AOCI opt-out election in

Schedule RC-R, Part I, item 3.a, the carrying value of the exposure (including net accrued but uncollected interest and fees)4 less any net unrealized gains on the exposure plus any net unrealized losses on the exposure included in AOCI.

(3) For AFS preferred stock classified as an equity security under GAAP where the bank has made the

AOCI opt-out election in Schedule RC-R, Part I, item 3.a, the carrying value less any net unrealized gains that are reflected in such carrying value, but are excluded from the bank’s regulatory capital components.

(4) For the off-balance sheet component of an exposure,5 the notional amount of the off-balance sheet

component multiplied by the appropriate credit conversion factor in §.33 of the regulatory capital rules.

(5) For an exposure that is an OTC derivative contract, the exposure amount determined under §.34 or

§.132 of the regulatory capital rules. (6) For an exposure that is a derivative contract that is a cleared transaction, the exposure amount

determined under §.35 or §.133 of the regulatory capital rules. For derivatives that have matured, but have associated unsettled receivables or payables that are

reported as assets or liabilities, respectively, on the balance sheet as of the quarter-end report date, a banking organization does not need to report such notional amounts for derivatives that have matured for purposes of Schedule RC-R, Part II.

1 Not including: (1) an available-for-sale (AFS) or held-to-maturity (HTM) security where the bank has made the Accumulated Other Comprehensive Income (AOCI) opt-out election in Schedule RC-R, Part I, item 3.a, (2) an over-the-counter (OTC) derivative contract, (3) a repo-style transaction or an eligible margin loan for which the bank determines the exposure amount under §.37 of the regulatory capital rules, (4) a cleared transaction, (5) a default fund contribution, or (6) a securitization exposure. 2 As indicated in the definition in §.2 of the regulatory capital rules, carrying value means, with respect to an asset, the value of the asset on the balance sheet of the bank determined in accordance with U.S. generally accepted accounting principles (GAAP). For all assets other than available-for-sale debt securities or purchased credit- deteriorated assets, the carrying value is not reduced by any associated credit loss allowance that is determined in accordance with U.S. GAAP. 3 Not including: (1) a securitization exposure, (2) an equity exposure, or (3) preferred stock classified as an equity security under U.S. GAAP. 4 Where the bank has made the AOCI opt-out election, accrued but uncollected interest and fees reported in Schedule RC, item 11, “Other assets,” associated with AFS or HTM debt securities that are not securitization exposures should be reported in Schedule RC-R, Part II, item 8, “All other assets.” 5 Not including: (1) an available-for-sale (AFS) or held-to-maturity (HTM) security where the bank has made the Accumulated Other Comprehensive Income (AOCI) opt-out election in Schedule RC-R, Part I, item 3.a, (2) an over-the-counter (OTC) derivative contract, (3) a repo-style transaction or an eligible margin loan for which the bank determines the exposure amount under §.37 of the regulatory capital rules, (4) a cleared transaction, (5) a default fund contribution, or (6) a securitization exposure.

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Part II. (cont.) General Instructions for Schedule RC-R, Part II. (cont.) (7) For an exposure that is an eligible margin loan or repo-style transaction (including a cleared

transaction) for which the bank calculates the exposure amount as provided in §.37, the exposure amount determined under §.37 of the regulatory capital rules.

(8) For an exposure that is a securitization exposure, the exposure amount determined under §.42 of the

regulatory capital rules. Amounts to Report in Column B The amount to report in column B will vary depending upon the nature of the particular item. For items 1 through 8 and 11 of Schedule RC-R, Part II, column B should include the amount of the reporting bank's on-balance sheet assets that are deducted or excluded (not risk weighted) in the determination of risk-weighted assets. Column B should include assets that are deducted from capital such as goodwill; other intangible assets; gain on sale of securitization exposures; threshold deductions above the 25 percent individual limits for (1) deferred tax assets (DTAs) arising from temporary differences that could not be realized through net operating loss carrybacks, (2) mortgage servicing assets (MSAs), net of associated deferred tax liabilities (DTLs), and (3) investments in the capital of unconsolidated financial institutions; and any other assets that must be deducted in accordance with the requirements of a bank's primary federal supervisory authority. Column B should also include items that are excluded from the calculation of risk-weighted assets, such as the allowance for loan and lease losses or allowances for credit losses, as applicable; allocated transfer risk reserves; and certain on-balance sheet asset amounts associated with derivative contracts that are included in the calculation of the credit equivalent amounts of the derivative contracts. In addition, for items 1 through 8 and 11 of Schedule RC-R, Part II, column B should include any difference between the balance sheet amount of an on-balance sheet asset and its exposure amount as described above under “Exposure Amount Subject to Risk Weighting.” Note: For items 1 through 8 and 11 of Schedule RC-R, Part II, the sum of columns B through R must equal the balance sheet asset amount reported in column A. For items 9.a through 9.d of Schedule RC-R, Part II, the amount a reporting bank should report in column B will depend upon the risk-weighting approach it uses to risk weight its securitization exposures and whether the bank has made the AOCI opt-out election in Schedule RC-R, Part I, item 3.a. For each of items 9.a through 9.d, a mathematical relationship similar to the one described above will hold true, such that the sum of columns B through Q must equal the balance sheet asset amount reported in column A. • If a bank uses the 1,250 percent risk weight approach to risk weight an on-balance sheet

securitization exposure, the bank will report in column B the difference between the carrying value of the exposure and the exposure amount that is to be risk weighted. For example, if a bank has a securitization exposure that is an AFS debt security with a $105 carrying value (i.e., fair value) including a $5 unrealized gain (in other words, a $100 amortized cost), the bank would report the following: o If the bank has not made (or cannot make) the AOCI opt-out election, the bank would report zero

in item 9.b, column B. The bank would report the $105 exposure amount to be risk weighted in item 9.b, column Q–1250% risk weight.

o If the bank has made the AOCI opt-out election, the bank would report any unrealized gain as a positive number in item 9.b, column B, and any unrealized loss as a negative number in item 9.b, column B. Therefore, in this example, the bank would report $5 in item 9.b, column B. Because

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Part II. (cont.) General Instructions for Schedule RC-R, Part II. (cont.) the bank reverses out the unrealized gain for regulatory capital purposes because it has made

the AOCI opt-out election, it does not have to risk weight the gain. (Note: The bank also would report the $100 exposure amount to be risk weighted in item 9.b, column Q–1250% risk weight.)

• If the bank uses the Simplified Supervisory Formula Approach (SSFA) or the Gross-Up Approach to

risk weight an on-balance sheet securitization exposure, the bank will report in column B the same amount that it reported in column A.

For item 10 of Schedule RC-R, Part II, the amount a reporting bank should report in column B also will depend upon the risk-weighting approach it uses to risk weight its securitization exposures. If a bank uses the 1,250 percent risk weight approach to risk weight an off-balance sheet securitization exposure, the bank will report in column B any difference between the notional amount of the off-balance sheet securitization exposure that is reported in column A and its exposure amount. If the bank uses the SSFA or the Gross-Up Approach to risk weight an off-balance sheet securitization exposure, the bank will report in column B the same amount that it reported in column A. An example is presented in the instructions for Schedule RC-R, Part II, item 10. For item 10 of Schedule RC-R, Part II, the sum of columns B through Q must equal the amount of the off-balance sheet securitization exposures reported in column A. For items 12 through 21 of Schedule RC-R, Part II, column B should include the credit equivalent amounts of the reporting bank's derivative contracts and off-balance sheet items that are covered by the regulatory capital rules. For the off-balance sheet items in items 12 through 19, the credit equivalent amount to be reported in column B is calculated by multiplying the face, notional, or other amount reported in column A by the appropriate credit conversion factor. The credit equivalent amounts in column B are to be allocated to the appropriate risk-weight categories in columns C through J (or to the securitization exposure collateral category in column R, if applicable). For items 12 through 21 of Schedule RC-R, Part II, the sum of columns C through J (plus column R, if applicable) must equal the credit equivalent amount reported in column B. Treatment of Collateral and Guarantees a. Collateralized Transactions The rules for recognition of collateral are in §.37 and pertinent definitions in §.2 of the regulatory capital rules. The regulatory capital rules define qualifying financial collateral as cash on deposit, gold bullion, investment grade long- and short-term debt exposures (that are not resecuritization exposures), publicly traded equity securities and convertible bonds, and money market fund or other mutual fund shares with prices that are publicly quoted on a daily basis. Banks may apply one of two approaches, as outlined in §.37, to recognize the risk-mitigating effects of qualifying financial collateral: (1) Simple Approach: Can be used for any type of exposure. Under this approach, banks may apply a

risk weight to the portion of an exposure that is secured by the fair value of the financial collateral based on the risk weight assigned to the collateral under §.32. However, under this approach, the risk weight assigned to the collateralized portion of the exposure may not be less than 20 percent, unless one of the following exceptions applies:

• Zero percent risk weight: May be assigned to an exposure to an over-the-counter (OTC)

derivative contract that is marked-to-market on a daily basis and subject to a daily margin requirement, to the extent that the contract is collateralized to cash on deposit; to the portion of an exposure collateralized by cash on deposit; to the portion of an exposure collateralized by an exposure to a sovereign that qualifies for the zero percent risk weight under §.32 and the bank has discounted the fair value of the collateral by 20 percent.

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Part II. (cont.) General Instructions for Schedule RC-R, Part II. (cont.)

• 10 percent risk weight: May be assigned to an exposure to an OTC derivative contract that is

marked-to-market on a daily basis and subject to a daily margin requirement, to the extent that the contract is collateralized by an exposure to a sovereign that qualified for a zero percent risk weight under §.32.

(2) Collateral Haircut Approach: can be used only for repo-style transactions, eligible margin loans, collateralized derivative transactions, and single-product netting sets of such transactions. Under this approach, banks would apply either standard supervisory haircuts or own internal estimates for haircuts to the value of the collateral. See §.37(c) of the regulatory capital rules for a description of the calculation of the exposure amount, standard supervisory market price volatility haircuts, and requirements for using own internal estimates for haircuts.

Banks may use any approach described in §.37 that is valid for a particular type of exposure or transaction; however, they must use the same approach for similar transactions or exposures. If an exposure is partially secured, that is, the market value (or in cases of using the Collateral Haircut Approach, the adjusted market value) of the financial collateral is less than the face amount of an asset or off-balance sheet exposure, only the portion that is covered by the market value of the collateral is to be reported in the risk-weight category item appropriate to the type of collateral. The uncovered portion of the exposure continues to be assigned to the initial risk-weight category item appropriate to the exposure. The face amount of an exposure secured by multiple types of qualifying collateral is to be reported in the risk-weight category items appropriate to the collateral types, apportioned according to the market value of the types of collateral. Exposures collateralized by deposits at the reporting institution The portion of any exposure collateralized by deposits at the reporting institution would be eligible for a zero percent risk weight. The remaining portion of the exposure that is not collateralized by deposits should be risk-weighted according to the regulatory capital rules. b. Guarantees and Credit Derivatives

The rules for recognition of guarantees and credit derivatives are in §.36 and pertinent definitions are in §.2 of the regulatory capital rules. A bank may recognize the credit risk mitigation benefits of an eligible guarantee or eligible credit derivative by substituting the risk weight associated with the protection provider for the risk weight assigned to the exposure. Please refer to the definitions of eligible guarantee, eligible guarantor, and eligible credit derivative in §.2 of the regulatory capital rules. Note that in the definition of eligible guarantee, where the definition discusses contingent guarantees, only contingent guarantees of the U.S. government or its agencies are recognized. The coverage amount provided by an eligible guarantee or eligible credit derivative will need to be adjusted downward if:

• The residual maturity of the credit risk mitigant is less than that of the hedged exposure (maturity mismatch adjustment), see §.36(c);

• The credit risk mitigant does not include as a credit event a restructuring of the hedged exposure involving forgiveness or postponement of principal, interest, or fees that results in a credit loss event (that is, a charge-off, specific provision, or other similar debit to the profit and loss account), see §.36(d); or

• The credit risk mitigant is denominated in a currency different from that in which the hedged exposure is denominated (currency mismatch adjustment, see §.36(e).

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Part II. (cont.) General Instructions for Schedule RC-R, Part II. (cont.)

For further information on credit derivatives, refer to the instructions for Schedule RC-L, item 7, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports. Exposures covered by Federal Deposit Insurance Corporation (FDIC) loss-sharing agreements The portion of any exposure covered by an FDIC loss-sharing agreement would be eligible for a 20 percent risk weight. The remaining uncovered portion of the exposure should be risk weighted according to the regulatory capital rules. Treatment of Equity Exposures The treatment of equity exposures are outlined in §.51 through §.53 of the regulatory capital rules. Banks must use different methodologies to determine risk weighted assets for their equity exposures:

• The Simple Risk Weight Approach, which must be used for all types of equity exposures that are not equity exposures to a mutual fund or other investment fund, and

• Full look-through, simple modified look-through, and alternative modified look-through approaches for equity exposures to mutual funds and other investment funds.

Treatment of stable value protection The regulatory capital rules define stable value protection (SVP) in §.51(a)(3). A bank that purchases SVP on an investment in a separate account must treat the portion of the carrying value of the investment attributable to the SVP as an exposure to the provider of the protection. The remaining portion of the carrying value of the investment must be treated as an equity exposure to an investment fund. A bank that provides SVP must treat the exposure as an equity derivative with an adjusted carrying value equal to the sum of the on-balance and off-balance sheet adjusted carrying value. Adjusted carrying value The adjusted carrying value of an equity exposure is equal to:

• On-balance sheet equity exposure: The carrying value of the exposure. • On-balance sheet equity exposure that is classified as AFS where the bank has made the

AOCI opt-out election: The carrying value of the exposure less any net unrealized gains on the exposure that are reflected in the carrying value but excluded from regulatory capital.

• Off-balance sheet portion of an equity exposure (that is not an equity commitment): The effective notional principal amount1 of the exposure minus the adjusted carrying value of the on-balance sheet component of the exposure.

For an equity commitment (a commitment to purchase an equity exposure), the effective notional principal amount must be multiplied by the following credit conversion factors: 20 percent for conditional equity commitments with an original maturity of one year or less, 50 percent for conditional equity commitments with an original maturity of more than one year, and 100 percent for unconditional equity commitments. Equity exposure risk weighting methodologies (1) Simple Risk Weight Approach: Must be used for all types of equity exposures that are not equity

exposures to a mutual fund or other investment fund. Under this approach, banks must determine the risk weighted asset amount of an individual equity exposure by multiplying (1) the adjusted

1 The regulatory capital rules define the “effective notional principal amount” as an exposure of equivalent size to a hypothetical on-balance sheet position in the underlying equity instrument that would evidence the same change in fair value (measured in dollars) given a small change in the price of the underlying equity instrument.

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Part II. (cont.) General Instructions for Schedule RC-R, Part II. (cont.)

assessments publicly available on its website.1 The OECD does not assign a CRC to every country; for example, it does not assign a CRC to a number of major economies; it also does not assign a CRC to many smaller countries. As such, the table below also provides risk weights for countries with no CRC based on whether or not those particular countries are members of the OECD. In addition, there is a higher risk weight of 150 percent for any country that has defaulted on its sovereign debt within the past 5 years, regardless of the CRC rating. For information on the risk weights to be assigned to reported balance sheet items (items 1 through 8) and off-balance sheet items and other exposures (items 12 through 22) that are exposures to foreign central governments (including foreign central banks), foreign banks, and foreign public sector entities, see the discussion on the Treatment of Exposures to Sovereign Entities and Foreign Banks in the General Instructions for Schedule RC-R, Part II, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports. Summary of Risk Weights for Exposures to Government and Public Sector Entities The following are some of the most common exposures to government and public sector entities and the risk weights that apply to them:

Column C – 0% risk weight: • All exposures (defined broadly to include securities, loans, and leases) that are direct exposures

to, or the portion of exposures that are directly and unconditionally guaranteed by, the U.S. Government or U.S. Government agencies. This includes the portions of deposits insured by the FDIC or the National Credit Union Administration (NCUA).

• Exposures that are collateralized by cash on deposit in the reporting bank. • Exposures that are collateralized by securities issued or guaranteed by the U.S. Government, or

other sovereign governments that qualify for the zero percent risk weight. Collateral value must be adjusted under §.37 of the regulatory capital rules.

• Exposures to, and the portions of exposures guaranteed by, the Bank for International Settlements, the European Central Bank, the European Commission, the International Monetary Fund, the European Stability Mechanism, the European Financial Stability Facility, or a multilateral development bank (as specifically defined in §.2 of the regulatory capital rules).

Column G – 20% risk weight: • The portion of exposures that are conditionally guaranteed by the U.S. Government or U.S.

Government agencies. This includes exposures, or the portions of exposures, conditionally guaranteed by the FDIC or the NCUA.

• The portion of exposures that are collateralized by cash on deposit in the bank or by securities issued or guaranteed by the U.S. Government or U.S. Government agencies that are not included in zero percent column.

• General obligation exposures to states, municipalities, and other political subdivisions of the United States.

• Exposures to U.S. government-sponsored entities (GSEs) other than equity exposures or preferred stock, and risk-sharing securities.

Column H – 50% risk weight: • Revenue obligation exposures to states, municipalities, and other political subdivisions of the

United States.

Column I – 100% risk weight: • Preferred stock of U.S. GSEs.

1 See http://www.oecd.org/trade/xcred/crc.htm.

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Part II. (cont.) General Instructions for Schedule RC-R, Part II. (cont.) Risk-Weighted Assets for Securitization Exposures Under the agencies’ regulatory capital rules, three separate approaches are available for setting the regulatory capital requirements for securitization exposures, as defined in §.2 of the regulatory capital rules. Securitization exposures include asset-backed and mortgage-backed securities, other positions in securitization transactions, re-securitizations, and structured finance programs1 (except credit-enhancing interest-only (CEIO) strips). Include as a securitization exposure for risk-weighted asset purposes any amount reported in Schedule RC, item 11, “Other assets,” for accrued interest receivable on an on-balance sheet securitization exposure. In general, under each of the three approaches, the risk-based capital requirement for a position in a securitization or structured finance program (hereafter referred to collectively as a securitization) is computed by multiplying the calculated amount of the position (including any accrued interest receivable on the position) by the appropriate risk weight. The three approaches to determining the proper risk weight for a securitization exposure are the Simplified Supervisory Formula Approach (SSFA), the Gross-Up Approach, or the 1,250 Percent Risk Weight Approach. If a securitization exposure is not an after-tax gain-on-sale resulting from a securitization that requires deduction, or the portion of a CEIO strip that does not constitute an after-tax gain-on-sale,2 a bank may assign a risk weight to the securitization exposure using the SSFA if certain requirements are met. If a bank is not subject to Subpart F (the market risk capital rule) of the regulatory capital rules, it may instead choose to assign a risk weight to the securitization exposure using the Gross-Up Approach if certain requirements are met. However, the bank must apply either the SSFA or the Gross-Up Approach consistently across all of its securitization exposures. However, if the bank cannot, or chooses not to, apply the SSFA or the Gross-Up Approach to an individual securitization exposure, the bank must assign a 1,250 percent risk weight to that exposure. Both traditional and synthetic securitizations must meet certain operational requirements before applying either the SSFA or the Gross-Up Approach. Furthermore, banks must complete certain due diligence requirements and satisfactorily demonstrate a comprehensive understanding of the features of the securitization exposure that would materially affect the performance of the exposure. If these due diligence requirements are not met, the bank must assign the securitization exposure a risk weight of 1,250 percent. The bank’s analysis must be commensurate with the complexity of the securitization exposure and the materiality of the exposure in relation to its capital. Banks should refer to §.41 of the regulatory capital rules to review the details of these operational and due diligence requirements. For example, a bank not subject to the market risk capital rule has 12 securitization exposures. The operational and due diligence requirements have been met for 10 of the exposures, to which the bank applies the Gross-Up Approach. The bank then assigns a 1,250 percent risk weight to the other two exposures. Alternatively, the bank could assign a 1,250 percent risk weight to all 12 securitization exposures. a. Exposure Amount Calculation The exposure amount of an on-balance sheet securitization exposure that is not an available-for-sale or held-to-maturity security where the bank has made the AOCI opt-out election in Schedule RC-R, Part I, item 3.a, a repo-style transaction, an eligible margin loan, an over-the-counter (OTC) derivative contract, or a cleared transaction is equal to the carrying value of the exposure (including any accrued interest receivable on the exposure reported in Schedule RC, item 11, “Other assets”). 1 Structured finance programs include, but are not limited to, collateralized debt obligations. 2 Consistent with the regulatory capital rules, a bank must deduct from common equity tier 1 capital any after-tax gain-on-sale resulting from a securitization and must apply a 1,250 percent risk weight to the portion of a CEIO strip that does not constitute an after-tax gain-on-sale.

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Part II. (cont.) General Instructions for Schedule RC-R, Part II. (cont.) Third, the risk weight of any particular securitization exposure (expressed as a percent) will depend on the tranche’s attachment point and detachment point relative to KA.

Case 1: If the detachment point, parameter D, is less than or equal to KA, the exposure is assigned a risk weight of 1,250 percent. Case 2: If the attachment point, parameter A, is less than KA and the detachment point, parameter D, is greater than KA, the risk weight is a weighted average of 1,250 percent and 1,250 percent times KSSFA, calculated as shown below:

𝑹𝑹𝑹𝑹 = ��𝑲𝑲𝑨𝑨 − 𝑨𝑨𝑫𝑫 − 𝑨𝑨

� × 𝟏𝟏,𝟐𝟐𝟐𝟐𝟐𝟐 𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑� + ��𝑫𝑫 − 𝑲𝑲𝑨𝑨

𝑫𝑫 − 𝑨𝑨� × 𝟏𝟏,𝟐𝟐𝟐𝟐𝟐𝟐 𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑 × 𝑲𝑲𝑺𝑺𝑺𝑺𝑺𝑺𝑨𝑨�

Case 3: If the attachment point, parameter A, is greater than or equal to KA, the risk weight is the product of KSSFA and 1,250 percent, as shown in the following equation:

𝑹𝑹𝑹𝑹 = 𝟏𝟏,𝟐𝟐𝟐𝟐𝟐𝟐 𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑𝒑 × 𝑲𝑲𝑺𝑺𝑺𝑺𝑺𝑺𝑨𝑨 To determine the risk-based capital requirement under the SSFA, multiply the exposure amount (including any accrued interest receivable on the exposure) by the higher of either (1) the calculated risk weight or (2) a 20 percent risk weight. For purposes of reporting in Schedule RC-R, Part II, items 9 and 10, a bank would report in column T the risk-weighted asset amount calculated under the SSFA for its securitization exposures. c. Gross-Up Approach A bank that is not subject to the market risk capital rule (Subpart F) in the regulatory capital rules may apply the Gross-Up Approach instead of the SSFA to determine the risk weight of its securitization exposures, provided that it applies the Gross-Up Approach consistently to all of its securitization exposures. To calculate the risk weight for a securitization exposure using the Gross-Up Approach, a bank must calculate the following four inputs: (1) Pro rata share, which is the par value of the bank’s securitization exposure as a percent of the par

value of the tranche in which the securitization exposure resides. (2) Enhanced amount, which is the par value of the tranches that are more senior to the tranche in which

the bank’s securitization resides. (3) Exposure amount of the bank’s securitization exposure (including any accrued interest receivable on

the exposure). (4) Risk weight, which is the weighted-average risk weight of underlying exposures in the securitization

pool. The bank would calculate the credit equivalent amount which is equal to the sum of the exposure amount of the bank’s securitization exposure (3) and the pro rata share (1) multiplied by the enhanced amount (2). A bank must assign the higher of the weighted-average risk weight (4) or a 20 percent risk weight to the securitization exposure using the Gross-Up Approach.

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Part II. (cont.) General Instructions for Schedule RC-R, Part II. (cont.) To determine the risk-based capital requirement under the gross-up approach, multiply the higher of the two risk weights by the credit equivalent amount. These steps are outlined in the worksheet below: Gross-Up Approach Worksheet to Calculate the Capital Charge for a Securitization

Exposure that is Not a Senior Exposure1 (a) Currently outstanding par value of the bank’s non-senior securitization exposure divided by the currently outstanding par value of the entire tranche (e.g., 60%2) (b) Currently outstanding par value of the more senior positions in the securitization that are supported by the tranche in which the bank owns a non-senior securitization exposure (c) Pro rata share of the more senior positions currently outstanding in the securitization that are supported by the bank’s non-senior securitization exposure: enter (b) multiplied by (a) (d) Exposure amount of the bank’s non-senior securitization exposure (e) Enter the sum of (c) and (d) (f) Enter the weighted-average risk weight applicable to the assets underlying the securitization

(g) Risk-weighted asset amount of the bank’s non-senior securitization exposure: enter the higher of:

• (d) multiplied by 20%, or • (e) multiplied by (f)

(h) Capital charge for the risk-weighted asset amount of the bank’s non-senior securitization exposure: enter (g) multiplied by 8% For purposes of reporting its non-senior securitization exposures in Schedule RC-R, Part II, items 9 and 10, a bank would report in column U the risk-weighted asset amount calculated in line (g) on the Gross-Up Approach worksheet. For a senior securitization exposure, a bank would report in column U the exposure amount of its exposure multiplied by the weighted-average risk weight of the securitization’s underlying exposures, subject to a 20 percent risk-weight floor. Reporting in Schedule RC-R, Part II, When Using the Gross-Up Approach: If the bank’s non-senior security is an HTM securitization exposure, the amortized cost of this security is included on the Report of Condition balance sheet in Schedule RC, item 2.a, “Held-to-maturity securities,” and on the regulatory capital schedule in columns A and B of Schedule RC-R, Part II, item 9.a, “On-balance sheet securitization exposures – Held-to-maturity securities.” The risk-weighted asset amount from line (g) in the Gross-Up Approach Worksheet above is reported in column U of Schedule RC-R, Part II, item 9.a. If the bank’s security is an AFS securitization exposure, the fair value of this security is included on the Report of Condition balance sheet in Schedule RC, item 2.b, “Available-for-sale securities,” and on the regulatory capital schedule in column A of Schedule RC-R, Part II, item 9.b, “On-balance sheet securitization exposures – Available-for-sale securities.” For further information on the reporting of 1 A senior securitization exposure means a securitization exposure that has a first priority claim on the cash flows from the underlying exposures, without considering amounts due under interest rate or currency contracts, fees or other similar payments due. Time tranching (that is, maturity differences) also is not considered when determining whether a securitization exposure is a senior securitization exposure. 2 For example, if the currently outstanding par value of the entire tranche is $100 and the currently outstanding par value of the bank’s subordinated security is $60, then the bank would enter 60% in (a).

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Part II. (cont.) Item No. Caption and Instructions

2.a ○ Any securities reported as “structured financial products” in Schedule RC-B, item 5.b, (cont.) that are not securitization exposures and qualify for the 100 percent risk weight.

Note: Many of the structured financial products would be considered securitization exposures and must be reported in Schedule RC-R, Part II, item 9.a, for purposes of calculating risk-weighted assets.

o The portion of any exposure reported in Schedule RC, item 2.a, that is secured by collateral or has a guarantee that qualifies for the 100 percent risk weight.

o Also include all other HTM securities that do not qualify as securitization exposures reported in Schedule RC, item 2.a, that are not included in columns C through H and J.

• In column J–150% risk weight, include the exposure amounts of securities reported in

Schedule RC-B, column A, that are past due 90 days or more or in nonaccrual status (except sovereign exposures), excluding those portions that are covered by qualifying collateral or eligible guarantees as described in §.37 and §.36, respectively, of the regulatory capital rules.

• For HTM securities that are directly and unconditionally guaranteed by foreign central governments or are exposures to foreign banks that do not qualify as securitization exposures and must be risk-weighted according to the Country Risk Classification (CRC) methodology, assign these exposures to risk-weight categories based on the CRC methodology described in the General Instructions for Schedule RC-R, Part II, and the instructions for Schedule RC-R, Part, II, item 2.a, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

2.b Available-for-sale debt securities and equity securities with readily determinable fair

values not held for trading. For institutions that are not yet required to adopt FASB Accounting Standards Update No. 2016-01 (ASU 2016-01), which includes provisions governing the accounting for investments in equity securities, including investments in mutual funds, and eliminates the concept of available-for-sale (AFS) equity securities (see the Note preceding the instructions for Schedule RC, item 2.c), report in column A the fair value of AFS debt and equity securities reported in Schedule RC, item 2.b, excluding those AFS securities that qualify as securitization exposures as defined in §.2 of the regulatory capital rules. The fair value of those AFS securities reported in Schedule RC, item 2.b, that qualify as securitization exposures must be reported in Schedule RC-R, Part II, item 9.b, column A. The sum of Schedule RC-R, Part II, items 2.b and 9.b, column A, must equal Schedule RC, item 2.b.

For institutions that are required to have adopted ASU 2016-01, report in column A the sum of: (1) The fair value of AFS debt securities reported in Schedule RC, item 2.b; and (2) The fair value of equity securities with readily determinable fair values not held for trading

reported in Schedule RC, item 2.c; excluding those debt and equity securities that qualify as securitization exposures as defined

in §.2 of the regulatory capital rules. Exposure amount to be used for purposes of risk weighting by a bank that has not made the Accumulated Other Comprehensive Income (AOCI) opt-out election in Schedule RC-R, Part I, item 3.a:

For a security reported in Schedule RC-R, Part II, item 2.b, column A, where the bank has not made the AOCI opt-out election (i.e., most AOCI is included in regulatory capital), the exposure amount to be risk weighted by the bank is:

• For a debt security: the carrying value, which is the value of the asset reported on the balance sheet of the bank determined in accordance with GAAP (i.e., the fair value of the AFS debt security) and in column A.

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Part II. (cont.) Item No. Caption and Instructions 2.b • For equity securities and preferred stock classified as an equity under GAAP: (cont.) the adjusted carrying value.1 Exposure amount to be used for purposes of risk weighting by a bank that has made the

AOCI opt-out election in Schedule RC-R, Part I, item 3.a: • For institutions that are not yet required to adopt ASU 2016-01, for a security classified as

AFS where the bank has made the AOCI opt-out election (i.e., most AOCI is not included in regulatory capital), the exposure amount to be risk weighted by the bank is: o For a debt security: the carrying value, less any unrealized gain on the exposure or

plus any unrealized loss on the exposure included in AOCI. o For equity securities and preferred stock classified as an equity under GAAP:

the carrying value less any net unrealized gains that are reflected in such carrying value but are excluded from the bank’s regulatory capital components.

• For institutions that are required to have adopted ASU 2016-01, for a security reported in Schedule RC-R, Part II, item 2.b, column A, where the bank has made the AOCI opt-out election (i.e., most AOCI is not included in regulatory capital), the exposure amount to be risk weighted by the bank is: o For a debt security: the carrying value, less any unrealized gain on the exposure or

plus any unrealized loss on the exposure included in AOCI. o For equity securities and preferred stock classified as an equity under GAAP

with readily determinable fair values, the adjusted carrying value.2

• In column B, a bank that has made the AOCI opt-out election should include the difference between the fair value and amortized cost of those AFS debt securities that do not qualify as securitization exposures. This difference equals the amounts reported in Schedule RC-B, items 1 through 6, column D, minus items 1 through 6, column C, for those AFS debt securities included in these items that are not securitization exposures. o When fair value exceeds cost, report the difference as a positive number in

Schedule RC-R, Part II, item 2.b, column B. o When cost exceeds fair value, report the difference as a negative number (i.e., with a

minus (-) sign) in Schedule RC-R, Part II, item 2.b, column B. • In column B, for a bank that has made the AOCI opt-out election and is not yet required

to adopt ASU 2016-01: o If AFS equity securities with readily determinable fair values have a net unrealized

gain (i.e., Schedule RC-B, item 7, column D, exceeds item 7, column C), the portion of the net unrealized gain (55 percent) not included in Tier 2 capital should be included in Schedule RC-R, Part II, item 2.b, column B. The portion that is not included in Tier 2 capital equals Schedule RC-B, item 7, column D minus column C, minus Schedule RC-R, Part I, item 43.

1 Adjusted carrying value applies only to equity exposures and is defined in §.51 of the regulatory capital rules. In general, it includes an on-balance sheet amount as well as application of conversion factors to determine on-balance sheet equivalents of any off-balance sheet commitments to acquire equity exposures. For institutions that have not made the AOCI opt-out election, the on-balance sheet component is equal to the carrying value. Refer to §.51 for the precise definition. 2 Adjusted carrying value applies only to equity exposures and is defined in §.51 of the regulatory capital rules. In general, it includes an on-balance sheet amount as well as application of conversion factors to determine on-balance sheet equivalents of any off-balance sheet commitments to acquire equity exposures. For institutions that have made the AOCI opt-out election, the adjusted carrying value of an on-balance sheet equity exposure, such as an equity security with a readily determinable fair value not held for trading, is equal to the carrying value of the equity exposure, i.e., the value of the asset on the balance sheet determined in accordance with U.S. GAAP. Refer to §.51 for the precise definition.

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Part II. (cont.) Item No. Caption and Instructions 2.b Example: A bank reports an AFS debt security that is not a securitization exposure on its (cont.) balance sheet in Schedule RC, item 2.b, at a carrying value (i.e., fair value) of $105. The

amortized cost of the debt security is $100. The bank has made the AOCI opt-out election in Schedule RC-R, Part I, item 3.a. The AFS debt security has a $5 unrealized gain that is included in AOCI. In Schedule RC-R, Part II, item 2.b, the bank would report in Schedule RC-R, Part II, item 2.b:

a. $105 in column A. This is the carrying value of the AFS debt security on the bank’s balance sheet.

b. $5 in column B. This is the difference between the carrying value (i.e., fair value) of the debt security and its exposure amount that is subject to risk weighting. For a bank that has made the AOCI opt-out election, column B will typically represent the amount of the unrealized gain or unrealized loss on the security. Gains are reported as positive numbers; losses as negative numbers. (Note: If the bank has not made or cannot make the opt-out election, there will be no adjustment to be reported in column B.)

c. $100 is the exposure amount subject to risk weighting. This amount will be reported under the appropriate risk weight associated with the exposure (columns C through J). For a bank that has made the opt-out election, the exposure amount typically will be the carrying value (i.e., fair value) of the debt security excluding any unrealized gain or loss.

• In column B, for a bank that has made the AOCI opt-out election and is required to have

adopted ASU 2016-01, no amount should be included for equity securities and preferred stock classified as an equity under GAAP with readily determinable fair values that are reported in Schedule RC-R, Part II, item 2.b, column A.

• In column B, include the amount of:

o Investments in the capital of unconsolidated financial institutions that are reported in Schedule RC, item 2.b (for a bank that is not yet required to adopt ASU 2016-01) or item 2.c (for a bank that is required to have adopted ASU 2016-01), and have been deducted from capital in Schedule RC-R, Part I, item 13, item 24, and item 45.

• In column C–0% risk weight, the zero percent risk weight applies to exposures to the U.S.

government, a U.S. government agency, or a Federal Reserve Bank, and those exposures otherwise unconditionally guaranteed by the U.S. government. Include exposures to or unconditionally guaranteed by the FDIC or the NCUA. Certain foreign government exposures and certain entities listed in §.32 of the regulatory capital rules may also qualify for zero percent risk weight. Include the exposure amounts of those debt securities reported in Schedule RC-B, column C, that do not qualify as securitization

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Part II. (cont.) Item No. Caption and Instructions 2.b exposures that qualify for the zero percent risk weight. Such debt securities may include (cont.) portions of, but may not be limited to: ○ Item 1, "U.S. Treasury securities," ○ Item 2, those obligations issued by U.S. Government agencies,

o Item 4.a.(1), those residential mortgage pass-through securities guaranteed by GNMA,

o Portions of item 4.b.(1), Other residential mortgage-backed securities (MBS) "Issued or guaranteed by U.S. Government agencies or sponsored agencies," such as GNMA exposures,

o Item 4.c.(1)(a), certain portions of commercial MBS “Issued or guaranteed by FNMA, FHLMC, or GNMA” that represent GNMA securities, and

o Item 4.c.(2)(a), certain portions of commercial MBS “Issued or guaranteed by U.S. Government agencies or sponsored agencies” that represent GNMA securities.

o The portion of any exposure reported in Schedule RC, item 2.b, that is secured by collateral or has a guarantee that qualifies for the zero percent risk weight.

• In column G–20% risk weight, the 20 percent risk weight applies to general obligations of

U.S. states, municipalities, and U.S. public sector entities. It also applies to exposures to U.S. depository institutions and credit unions, exposures conditionally guaranteed by the U.S. government, as well as exposures to U.S. government sponsored enterprises. Certain foreign government and foreign bank exposures may qualify for the 20 percent risk weight as indicated in §.32 of the regulatory capital rules. Include the exposure amounts of those debt securities reported in Schedule RC-B, column C, that do not qualify as securitization exposures that qualify for the 20 percent risk weight. Such debt securities may include portions of, but may not be limited to: o Item 2, those obligations issued by U.S. Government-sponsored agencies (exclude

interest-only securities), o Item 3, "Securities issued by states and political subdivisions in the U.S." that

represent general obligation securities, o Item 4.a.(1), those residential mortgage pass-through securities issued by FNMA and

FHLMC (exclude interest-only securities), o Item 4.b.(1), Other residential MBS "Issued or guaranteed by U.S. Government

agencies or sponsored agencies," (exclude interest-only securities) o Item 4.c.(1)(a), those commercial MBS “Issued or guaranteed by FNMA, FHLMC, or

GNMA” that represent FHLMC and FNMA securities (exclude interest-only securities),

o Item 4.c.(2)(a), those commercial MBS “Issued or guaranteed by U.S. Government agencies or sponsored agencies” that represent FHLMC and FNMA securities (exclude interest-only securities),

o Item 4.b.(2), Other residential MBS "Collateralized by MBS issued or guaranteed by U.S. Government agencies or sponsored agencies" (exclude interest-only securities), and

o Any securities categorized as “structured financial products” on Schedule RC-B that are not securitization exposures and qualify for the 20 percent risk weight. Note: Many of the structured financial products would be considered securitization exposures and must be reported in Schedule RC-R, Part II, item 9.b, for purposes of calculating risk-weighted assets. Exclude interest-only securities.

o The portion of any exposure reported in Schedule RC, item 2.b, that is secured by collateral or has a guarantee that qualifies for the 20 percent risk weight.

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Part II. (cont.) Item No. Caption and Instructions 2.b • In column H–50% risk weight, include the exposure amounts of those debt securities (cont.) reported in Schedule RC-B, column C, that do not qualify as securitization exposures that

qualify for the 50 percent risk weight. Such debt securities may include portions of, but may not be limited to: o Item 3, "Securities issued by states and political subdivisions in the U.S.," that

represent revenue obligation securities, ○ Item 4.a.(2), "Other [residential mortgage] pass-through securities," (that represent

residential mortgage exposures that qualify for the 50 percent risk weight. (Pass-through securities that do not qualify for the 50 percent risk weight should be assigned to the 100 percent risk weight category.)

o Item 4.b.(2), Other residential MBS "Collateralized by MBS issued or guaranteed by U.S. Government agencies or sponsored agencies" (exclude portions subject to an FDIC loss-sharing agreement and interest-only securities) that represent residential mortgage exposures that qualify for the 50 percent risk weight, and

o Item 4.b.(3), “All other residential MBS.” Include only those MBS that qualify for the 50 percent risk weight. Refer to §.32(g), (h) and (i) of the regulatory capital rules. Note: Do not include MBS that are tranched for credit risk; those should be reported as securitization exposures in Schedule RC-R, Part II, item 9.b. Do not include interest-only securities.

o The portion of any exposure reported in Schedule RC, item 2.b, that is secured by collateral or has a guarantee that qualifies for the 50 percent risk weight.

• In column I–100% risk weight, include the exposure amounts of those debt securities

reported in Schedule RC-B, column C, that do not qualify as securitization exposures that qualify for the 100 percent risk weight. Such debt securities may include portions of, but may not be limited to: o Item 4.a.(2), "Other [residential mortgage] pass-through securities," that represent

residential mortgage exposures that qualify for the 100 percent risk weight, o Item 4.b.(2), Other residential MBS "Collateralized by MBS issued or guaranteed by

U.S. Government agencies or sponsored agencies" (excluding portions subject to an FDIC loss-sharing agreement) that represent residential mortgage exposures that qualify for the 100 percent risk weight,

o Item 4.b.(3), "All other residential MBS." Include only those MBS that qualify for the 100 percent risk weight. Refer to §.32(g), (h) and (i) of the regulatory capital rules. Note: Do not include MBS portions that are tranched for credit risk; those should be reported as securitization exposures in Schedule RC-R, Part II, item 9.b.

o Item 4.c.(1)(b), “Other [commercial mortgage] pass-through securities,” o Item 4.c.(2)(b), “All other commercial MBS,” o Item 5.a, "Asset-backed securities," o Any securities reported as “structured financial products” in Schedule RC-B, item 5.b,

that are not securitization exposures and qualify for the 100 percent risk weight. Note: Many of the structured financial products would be considered securitization exposures and must be reported in Schedule RC-R, Part II, item 9.b, for purposes of calculating risk-weighted assets.

o The portion of any exposure reported in Schedule RC, item 2.b, that is secured by collateral or has a guarantee that qualifies for the 100 percent risk weight.

o All other AFS debt securities that do not qualify as securitization exposures reported in Schedule RC, item 2.b, that are not included in columns C through H, J through N, or R.

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Part II. (cont.) Item No. Caption and Instructions 2.b Also include in column I–100% risk weight the exposure amounts of publicly traded equity (cont.) exposures with readily determinable fair values and equity exposures to investment funds

with readily determinable fair values (including mutual funds) reported in Schedule RC, item 2.b (for a bank that is not yet required to adopt ASU 2016-01) or item 2.c (for a bank that is required to have adopted ASU 2016-01), to the extent that the aggregate carrying value of the bank’s equity exposures does not exceed 10 percent of total capital. If the bank’s aggregate carrying value of equity exposures is greater than 10 percent of total capital, the bank must report the exposure amount of its equity exposures to investments funds with readily determinable fair values (including mutual funds) in column R (and the risk-weighted asset amount of such AFS equity exposures in column S) and the exposure amount of its other equity exposures with readily determinable fair values in either columns L or N, as appropriate. For further information on the treatment of equity exposures, refer to §.51 to §.53 of the regulatory capital rules.

• In column J–150% risk weight, include the exposure amounts of securities reported in Schedule RC-B, column C, that are past due 90 days or more or in nonaccrual status (except sovereign exposures), excluding those portions that are covered by qualifying collateral or eligible guarantees as described in §.37 and §.36, respectively, of the regulatory capital rules.

• In column L–300% risk weight,

For a bank that is not yet required to adopt ASU 2016-01, for publicly traded AFS equity securities with readily determinable fair values reported in Schedule RC-B, item 7 (except equity securities to investment firms), include the fair value of these equity securities (as reported in Schedule RC-B, item 7, column D) if they have a net unrealized loss. If these equity securities have a net unrealized gain, include their adjusted carrying value (as reported in Schedule RC-B, item 7, column C) plus the portion of the unrealized gain (up to 45 percent) included in tier 2 capital (as reported in Schedule RC-R, Part I, item 43).

o For a bank that is required to have adopted ASU 2016-01, for publicly traded equity securities with readily determinable fair values reported in Schedule RC, item 2.c (except equity securities to investment firms), include the fair value of these equity securities as reported in Schedule RC, item 2.c.

• In column N–600% risk weight,

o For a bank that is not yet required to adopt ASU 2016-01, for AFS equity securities to investment firms with readily determinable fair values reported in Schedule RC-B, item 7, include the fair value of these equity securities (as reported in Schedule RC-B, item 7, column D) if they have a net unrealized loss. If these equity securities have a net unrealized gain, include their adjusted carrying value (as reported in Schedule RC-B, item 7, column C) plus the portion of the unrealized gain (up to 45 percent) included in tier 2 capital (as reported in Schedule RC-R, Part I, item 43).

o For a bank that is required to have adopted ASU 2016-01, for equity securities to investment firms with readily determinable fair values reported in Schedule RC, item 2.c, include the fair value of these equity securities as reported in Schedule RC, item 2.c.

• In columns R and S—Application of Other Risk-Weighting Approaches, include the

bank’s equity exposures to investment funds with readily determinable fair values

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Part II. (cont.) Item No. Caption and Instructions 2.b (including mutual funds) reported in Schedule RC, item 2.b (for a bank that is not yet (cont.) required to adopt ASU 2016-01) or item 2.c (for a bank that is required to have adopted

ASU 2016-01), if the aggregate carrying value of the bank’s equity exposures is greater than 10 percent of total capital. Report in column R the exposure amount of these equity exposures to investment funds. Report in column S the risk-weighted asset amount of these equity exposures to investment funds as measured under the full look-through approach, the simple modified look-through approach, or the alternative modified look-through approach described in §.53 of the regulatory capital rules. All three of these approaches require a minimum risk weight of 20 percent. For further information, refer to the discussion of “Treatment of Equity Exposures” in the General Instructions for Schedule RC-R, Part II.

• For available-for-sale debt securities and equity securities with readily determinable fair values not held for trading that are directly and unconditionally guaranteed by foreign central governments or are exposures to foreign banks that do not qualify as securitization exposures and must be risk-weighted according to the Country Risk Classification (CRC) methodology, assign these exposures to risk-weight categories based on the CRC methodology described in the General Instructions for Schedule RC-R, Part II, and the instructions for Schedule RC-R, Part, II, item 2.b, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

3 Federal funds sold and securities purchased under agreements to resell: 3.a Federal funds sold (in domestic offices). Report in column A the amount of federal funds

sold reported in Schedule RC, item 3.a, excluding those federal funds sold that qualify as securitization exposures as defined in §.2 of the regulatory capital rules. The amount of those federal funds sold reported in Schedule RC, items 3.a, that qualify as securitization exposures are to be reported in Schedule RC-R, Part II, item 9.d, column A.

• In column C–0% risk weight, include the portion of Schedule RC, item 3.a, that is directly

and unconditionally guaranteed by U.S. Government agencies. Also include the portion of any exposure reported in Schedule RC, item 3.a, that is secured by collateral or has a guarantee that qualifies for the zero percent risk weight.

• In column G–20% risk weight, include exposures to U.S. depository institution

counterparties. Also include the portion of any exposure reported in Schedule RC, item 3.a, that is secured by collateral or has a guarantee that qualifies for the 20 percent risk weight.

• In column H – 50% risk weight, include any exposure reported in Schedule RC, item 3.a,

that is secured by collateral or has a guarantee that qualifies for the 50 percent risk weight.

• In column I–100% risk weight, include exposures to non-depository institution

counterparties that lack qualifying collateral (refer to the regulatory capital rules for specific criteria). Also include the amount of federal funds sold reported in Schedule RC, item 3.a, that are not included in columns C through H and J. Also include the portion of any exposure reported in Schedule RC, item 3.a, that is secured by collateral or has a guarantee that qualifies for the 100 percent risk weight.

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Part II. (cont.) Item No. Caption and Instructions 3.a • For federal funds sold that that are directly and unconditionally guaranteed by foreign (cont.) central governments or exposures to foreign banks and must be risk weighted according

to the Country Risk Classification (CRC) methodology, assign these exposures to risk-weight categories based on the CRC methodology described in the General Instructions for Schedule RC-R, Part II, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

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Part II. (cont.) Item No. Caption and Instructions 3.b Securities purchased under agreements to resell. Report in columns A and B the

amount of securities purchased under agreements to resell (securities resale agreements, i.e., reverse repos) reported in Schedule RC, item 3.b, excluding those securities resale agreements that qualify as securitization exposures as defined in §.2 of the regulatory capital rules. The amount of those securities resale agreements reported in Schedule RC, item 3.b, that qualify as securitization exposures are to be reported in Schedule RC-R, Part II, item 9.d, column A.

• Note: For purposes of risk weighting, please distribute on-balance sheet securities

purchased under agreements to resell reported in Schedule RC, item 3.b, within the risk-weight categories in Schedule RC-R, Part II, item 16, “Repo-style transactions.” Banks should report their securities purchased under agreements to resell in item 16 in order for institutions to calculate their exposure, and thus risk-weighted assets, based on master netting set agreements covering repo-style transactions.

4 Loans and leases held for sale. Report in column A of the appropriate subitem the carrying

value of loans and leases held for sale (HFS) reported in Schedule RC, item 4.a, excluding those HFS loans and leases that qualify as securitization exposures as defined in §.2 of the regulatory capital rules.

The carrying value of those HFS loans and leases reported in Schedule RC, item 4.a, that qualify as securitization exposures must be reported in Schedule RC-R, Part II, item 9.d, column A.

The sum of the amounts reported in column A for items 4.a through 4.d of Schedule RC-R,

Part II, plus the carrying value of HFS loans and leases that qualify as securitization exposures and are reported in column A of item 9.d of Schedule RC-R, Part II, must equal Schedule RC, item 4.a.

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Part II. (cont.) Item No. Caption and Instructions 4.a Residential mortgage exposures. Report in column A the carrying value of loans held for

sale (HFS) reported in Schedule RC, item 4.a, that meet the definition of a residential mortgage exposure or a statutory multifamily mortgage1 in §.2 of the regulatory capital rules. Include in column A the carrying value of: • HFS loans secured by first or subsequent liens on 1-4 family residential properties

(excluding those that qualify as securitization exposures) that are reported in Schedule RC-C, Part I, items 1.c.(1), 1.c.(2)(a), and 1.c.(2)(b), and

• HFS loans secured by first or subsequent liens on multifamily residential properties with an original and outstanding amount of $1 million or less (excluding those that qualify as securitization exposures) that are reported in Schedule RC-C, Part I, item 1.d,

as these HFS loans would meet the regulatory capital rules’ definition of residential mortgage exposure.

1 Statutory multifamily mortgage means a loan secured by a multifamily residential property that meets the requirements under Section 618(b)(1) of the Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991, and that meets the following criteria: (1) The loan is made in accordance with prudent underwriting standards; (2) The principal amount of the loan at origination does not exceed 80 percent of the value of the property (or 75

percent of the value of the property if the loan is based on an interest rate that changes over the term of the loan) where the value of the property is the lower of the acquisition cost of the property or the appraised (or, if appropriate, evaluated) value of the property;

(3) All principal and interest payments on the loan must have been made on a timely basis in accordance with the terms of the loan for at least one year prior to applying a 50 percent risk weight to the loan, or in the case where an existing owner is refinancing a loan on the property, all principal and interest payments on the loan being refinanced must have been made on a timely basis in accordance with the terms of the loan for at least one year prior to applying a 50 percent risk weight to the loan;

(4) Amortization of principal and interest on the loan must occur over a period of not more than 30 years and the minimum original maturity for repayment of principal must not be less than 7 years;

(5) Annual net operating income (before making any payment on the loan) generated by the property securing the loan during its most recent fiscal year must not be less than 120 percent of the loan's current annual debt service (or 115 percent of current annual debt service if the loan is based on an interest rate that changes over the term of the loan) or, in the case of a cooperative or other not-for-profit housing project, the property must generate sufficient cash flow to provide comparable protection to the institution; and

(6) The loan is not more than 90 days past due, or on nonaccrual. A loan that meets the requirements of Section 618(b)(1) of the Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991 is a loan: (i) secured by a first lien on a residence consisting of more than 4 dwelling units; (ii) under which (I) the rate of interest does not change over the term of the loan, (b) the principal obligation does not exceed 80

percent of the appraised value of the property, and (c) the ratio of annual net operating income generated by the property (before payment of any debt service on the loan) to annual debt service on the loan is not less than 120 percent; or

(II) the rate of interest changes over the term of the loan, (b) the principal obligation does not exceed 75 percent of the appraised value of the property, and (c) the ratio of annual net operating income generated by the property (before payment of any debt service on the loan) to annual debt service on the loan is not less than 115 percent;

(iii) under which (I) amortization of principal and interest occurs over a period of not more than 30 years; (II) the minimum maturity for repayment of principal is not less than 7 years; and (III) timely payment of all principal and interest, in accordance with the terms of the loan, occurs for a period of

not less than 1 year; and (iv) that meets any other underwriting characteristics that the appropriate Federal banking agency may establish,

consistent with the purposes of the minimum acceptable capital requirements to maintain the safety and soundness of financial institutions.

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Part II. (cont.) Item No. Caption and Instructions 4.b High volatility commercial real estate exposures. Report in column A the carrying value

of loans held for sale (HFS) reported in Schedule RC, item 4.a, that are high volatility commercial real estate (HVCRE) exposures,1 including HVCRE exposures that are 90 days or more past due or in nonaccrual status.

1 HVCRE exposure means: (1) A credit facility secured by land or improved real property that, prior to being reclassified by the institution as a

non-HVCRE exposure pursuant to paragraph (6) of this definition— (i) Primarily finances, has financed, or refinances the acquisition, development, or construction of real property; (ii) Has the purpose of providing financing to acquire, develop, or improve such real property into income-

producing real property; and (iii) Is dependent upon future income or sales proceeds from, or refinancing of, such real property for the

repayment of such credit facility. (2) An HVCRE exposure does not include a credit facility financing— (i) The acquisition, development, or construction of properties that are— (A) One- to four-family residential properties. Credit facilities that do not finance the construction of one- to

four-family residential structures, but instead solely finance improvements such as the laying of sewers, water pipes, and similar improvements to land, do not qualify for the one- to four-family residential properties exclusion;

(B) Real property that would qualify as an investment in community development; or (C) Agricultural land; (ii) The acquisition or refinance of existing income-producing real property secured by a mortgage on such

property, if the cash flow being generated by the real property is sufficient to support the debt service and expenses of the real property, in accordance with the institution's applicable loan underwriting criteria for permanent financings;

(iii) Improvements to existing income-producing improved real property secured by a mortgage on such property, if the cash flow being generated by the real property is sufficient to support the debt service and expenses of the real property, in accordance with the institution's applicable loan underwriting criteria for permanent financings; or

(iv) Commercial real property projects in which— (A) The loan-to-value ratio is less than or equal to the applicable maximum supervisory loan-to-value ratio

as determined by an institution’s primary federal regulator; (B) The borrower has contributed capital of at least 15 percent of the real property's appraised, `as

completed' value to the project in the form of— (1) Cash; (2) Unencumbered readily marketable assets; (3) Paid development expenses out-of-pocket; or (4) Contributed real property or improvements; and (C) The borrower contributed the minimum amount of capital described under paragraph (2)(iv)(B) of this

definition before the institution advances funds (other than the advance of a nominal sum made in order to secure the institution's lien against the real property) under the credit facility, and such minimum amount of capital contributed by the borrower is contractually required to remain in the project until the HVCRE exposure has been reclassified by the institution as a non-HVCRE exposure under paragraph (6) of this definition;

(3) An HVCRE exposure does not include any loan made prior to January 1, 2015; (4) An HVCRE exposure does not include a credit facility reclassified as a non-HVCRE exposure under

paragraph (6) of this definition. (5) Value of contributed real property: For the purposes of this HVCRE exposure definition, the value of any real

property contributed by a borrower as a capital contribution is the appraised value of the property as determined under standards prescribed pursuant to section 1110 of the Financial Institutions Reform, Recovery, and Enforce- ment Act of 1989 (12 U.S.C. 3339), in connection with the extension of the credit facility or loan to such borrower.

(6) Reclassification as a non-HVCRE exposure: For purposes of this HVCRE exposure definition and with respect to a credit facility and an institution, an institution may reclassify an HVCRE exposure as a non-HVCRE exposure upon—

(i) The substantial completion of the development or construction of the real property being financed by the credit facility; and

(ii) Cash flow being generated by the real property being sufficient to support the debt service and expenses of the real property, in accordance with the institution's applicable loan underwriting criteria for permanent financings.

(7) For purposes of this definition, an institution is not required to reclassify a credit facility that was originated on or after January 1, 2015, and prior to April 1, 2020.

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Part II. (cont.) Item No. Caption and Instructions 4.b • In column C–0% risk weight, include the portion of any HVCRE exposure included in (cont.) loans and leases HFS that is secured by collateral or has a guarantee that qualifies for

the zero percent risk weight. This would include the portion of HVCRE exposures collateralized by deposits at the reporting institution.

• In column G–20% risk weight, include the portion of any HVCRE exposure included in

loans and leases HFS that is secured by collateral or has a guarantee that qualifies for the 20 percent risk weight. This would include the portion of any HVCRE exposure covered by an FDIC loss-sharing agreement.

• In column H–50% risk weight, include the portion of any HVCRE exposure included in

loans and leases HFS that is secured by collateral or has a guarantee that qualifies for the 50 percent risk weight.

• In column I–100% risk weight, include the portion of any HVCRE exposure included in

loans and leases HFS that is secured by collateral or has a guarantee that qualifies for the 100 percent risk weight.

• In column J–150% risk weight, include the carrying value of HVCRE exposures, as

defined in §.2 of the regulatory capital rules, included in Schedule RC, item 4.a, excluding those portions of the carrying value that are covered by qualifying collateral or eligible guarantees as described in §.37 and §.36, respectively, of the regulatory capital rules.

• In columns R and S–Application of Other Risk-Weighting Approaches, include the portion

of any HVCRE exposure included in loans and leases HFS reported in Schedule RC, item 4.a, that is secured by qualifying financial collateral that meets the definition of a securitization exposure in §.2 of the regulatory capital rules or is a mutual fund only if the bank chooses to recognize the risk-mitigating effects of the securitization exposure or mutual fund collateral under the Simple Approach outlined in §.37 of the regulatory capital rules. Under the Simple Approach, the risk weight assigned to the collateralized portion of the exposure may not be less than 20 percent. For information on the reporting of such HFS exposures in columns R and S, refer to the instructions for Schedule RC-R, Part, II, item 4.b, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

4.c Exposures past due 90 days or more or on nonaccrual. Report in column A the carrying

value of loans and leases held for sale (HFS) reported in Schedule RC, item 4.a., that are 90 days or more past due or in nonaccrual status according to the requirements set forth in §.32(k) of the regulatory capital rules. Do not include HFS sovereign exposures or HFS residential mortgage exposures, as described in §.32(a) and §.32(g), respectively, that are 90 days or more past due or in nonaccrual status (report such past due and nonaccrual exposures in Schedule RC-R, Part II, item 4.d and item 4.a, respectively). Also do not include HFS high volatility commercial real estate exposures that are 90 days or more past due or in nonaccrual status (report such exposures in Schedule RC-R, Part II, item 4.b).

• In column C–0% risk weight, include the portion of loans and leases HFS included in

Schedule RC, item 4.a, that are 90 days or more past due or in nonaccrual status (except as noted above), that is secured by collateral or has a guarantee that qualifies for the zero percent risk weight. This would include the portion of loans and leases HFS collateralized by deposits at the reporting institution.

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Part II. (cont.) Item No. Caption and Instructions 4.c • In column G–20% risk weight, include the portion of loans and leases HFS included in (cont.) Schedule RC, item 4.a, that are 90 days or more past due or in nonaccrual status (except

as noted above), that is secured by collateral or has a guarantee that qualifies for the 20 percent risk weight. This would include the portion of HFS loans covered by an FDIC loss-sharing agreement.

• In column H–50% risk weight, include the portion of loans and leases HFS included in Schedule RC, item 4.a, that are 90 days or more past due or in nonaccrual status (except as noted above), that is secured by collateral or has a guarantee that qualifies for the 50 percent risk weight.

• In column I–100% risk weight,, include the portion of loans and leases HFS included in

Schedule RC, item 4.a, that are 90 days or more past due or in nonaccrual status (except as noted above), that is secured by collateral or has a guarantee that qualifies for the 100 percent risk weight.

• In column J–150% risk weight, include the carrying value of loans and leases HFS included in Schedule RC, item 4.a, that are 90 days or more past due or in nonaccrual status (except as noted above), excluding those portions that are covered by qualifying collateral or eligible guarantees as described in §.37 and §.36, respectively, of the regulatory capital rules.

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Part II. (cont.) Item No. Caption and Instructions 4.c • In columns R and S–Application of Other Risk-Weighting Approaches, include the portion (cont.) of any loans and leases HFS included in Schedule RC, item 4.a, that are 90 days or more

past due or in nonaccrual status (except as noted above), that is secured by qualifying financial collateral that meets the definition of a securitization exposure in §.2 of the regulatory capital rules or is a mutual fund only if the bank chooses to recognize the risk-mitigating effects of the securitization exposure or mutual fund collateral under the Simple Approach outlined in §.37 of the regulatory capital rules. Under the Simple Approach, the risk weight assigned to the collateralized portion of the exposure may not be less than 20 percent. For information on the reporting of such HFS exposures in columns R and S, refer to the instructions for Schedule RC-R, Part, II, item 4.c, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

4.d All other exposures. Report in column A the carrying value of loans and leases held for sale (HFS) reported in Schedule RC, item 4.a, that are not reported in Schedule RC-R, Part II, items 4.a through 4.c above.

• In column C–0% risk weight, include the carrying value of the unconditionally guaranteed

portion of HFS Small Business Administration (SBA) “Guaranteed Interest Certificates” purchased in the secondary market that are included in Schedule RC-C, Part I. Also include the portion of any loans and leases HFS that that are not reported in Schedule RC-R, Part II, items 4.a through 4.c above, that is secured by collateral or has a guarantee that qualifies for the zero percent risk weight. This would include the portion of loans and leases HFS collateralized by deposits at the reporting institution.

• In column G–20% risk weight, include the carrying value of HFS loans to and

acceptances of other U.S. depository institutions that are reported in Schedule RC-C, Part I, item 2, plus the carrying value of the guaranteed portion of HFS SBA loans originated and held by the reporting bank included in Schedule RC-C, Part I, and the carrying value of the portion of HFS student loans reinsured by the U.S. Department of Education included in Schedule RC-C, Part I, item 6.d, "Other consumer loans." Also include the portion of any loans and leases HFS that that are not reported in Schedule RC-R, Part II, items 4.a through 4.c above, that is secured by collateral or has a guarantee that qualifies for the 20 percent risk weight. This would include the portion of loans and leases HFS covered by FDIC loss-sharing agreements.

• In column H–50% risk weight, include the carrying value of HFS loans that meet the

definition of presold construction loan in §.2 of the regulatory capital rules that qualify for the 50 percent risk weight. Also include the portion of any loans and leases HFS that that are not reported in Schedule RC-R, Part II, items 4.a through 4.c above, that is secured by collateral or has a guarantee that qualifies for the 50 percent risk weight.

• In column I–100% risk weight, include the carrying value of HFS loans and leases

reported in Schedule RC, item 4.a, that are not included in columns C through H, J, or R. This item would include 1-4 family construction loans reported in Schedule RC-C, Part I, item 1.a.(1) and loans secured by multifamily residential properties reported in Schedule RC-C, Part I, item 1.d, with an original amount of more than $1 million. Also include the carrying value of HFS loans that meet the definition of presold construction loan in §.2 of the regulatory capital rules that qualify for the 100 percent risk weight. Also include the portion of any loans and leases HFS that that are not reported in Schedule RC-R, Part II, items 4.a through 4.c above, that is secured by collateral or has a guarantee that qualifies for the 100 percent risk weight.

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Part II. (cont.) Item No. Caption and Instructions 4.d • In columns R and S–Application of Other Risk-Weighting Approaches, include the portion (cont.) of any HFS loans and leases, including HFS eligible margin loans, reported in

Schedule RC, item 4.a, that is secured by qualifying financial collateral that meets the definition of a securitization exposure in §.2 of the regulatory capital rules or is a mutual fund only if the bank chooses to recognize the risk-mitigating effects of the securitization exposure or mutual fund collateral under the Simple Approach, or the collateral margin approach for eligible margin loans, outlined in §.37 of the regulatory capital rules. Under the Simple Approach, the risk weight assigned to the collateralized portion of the exposure may not be less than 20 percent. For information on the reporting of such HFS exposures in columns R and S, refer to the instructions for Schedule RC-R, Part, II, item 4.d, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

• For all other HFS loans and leases that must be risk weighted according to the Country Risk Classification (CRC) methodology, assign these exposures to risk-weight categories based on the CRC methodology described in the General Instructions for Schedule RC-R, Part II, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

5 Loans and leases held for investment. Report in column A of the appropriate subitem

the carrying value of loans and leases held for investment (HFI) reported in Schedule RC, item 4.b, excluding those loans and leases HFI that qualify as securitization exposures as defined in §.2 of the regulatory capital rules.

The carrying value of those loans and leases HFI that qualify as securitization exposures must be reported in Schedule RC-R, Part II, item 9.d, column A.

The sum of the amounts reported in column A for items 5.a through 5.d of Schedule RC-R,

Part II, plus the carrying value of loans and leases HFI that qualify as securitization exposures and are reported in column A of item 9.d of Schedule RC-R, Part II, must equal Schedule RC, item 4.b.

5.a Residential mortgage exposures. Report in column A the carrying value of loans HFI

reported in Schedule RC, item 4.b, that meet the definition of a residential mortgage exposure or a statutory multifamily mortgage1 in §.2 of the regulatory capital rules. Include in column A the carrying value of: • Loans HFI secured by first or subsequent liens on 1-4 family residential properties

(excluding those that qualify as securitization exposures) that are reported in Schedule RC-C, Part I, items 1.c.(1), 1.c.(2)(a), and 1.c.(2)(b), and

• Loans HFI secured by first or subsequent liens on multifamily residential properties with an original and outstanding amount of $1 million or less (excluding those that qualify as securitization exposures) that are reported in Schedule RC-C, Part I, item 1.d,

as these loans would meet the regulatory capital rules’ definition of residential mortgage exposure.

Exclude from this item: • Loans HFI secured by multifamily residential properties included in Schedule RC-C,

Part I, item 1.d, that do not meet the definition of a residential mortgage exposure or a statutory multifamily mortgage and are not securitization exposures, and

• 1-4 family residential construction loans HFI reported in Schedule RC-C, Part I, item 1.a.(1), that are not securitization exposures.

1 See the instructions for Schedule RC-R, Part II, item 4.a, above for the definition of statutory multifamily mortgage.

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Part II. (cont.) Item No. Caption and Instructions 5.a These loans should be reported in Schedule RC-R, Part II, item 5.c, if they are past due (cont.) 90 days or more or on nonaccrual. Otherwise, these HFI loans should be reported in

Schedule RC-R, Part II, item 5.d.

• In column B, an institution that has adopted the current expected credit losses methodology (CECL) should include as a positive number the portion of Schedule RC-R, Part II, Memorandum item 4.a, “Amount of allowances for credit losses on purchased credit-deteriorated assets” for loans and leases held for investment that are applicable to purchased credit-deteriorated residential mortgage exposures.

• In column C–0% risk weight, include the portion of any HFI exposure that meets the

definition of residential mortgage exposure or statutory multifamily mortgage reported in Schedule RC, item 4.b, that is secured by collateral or has a guarantee that qualifies for the zero percent risk weight. This would include loans and leases HFI collateralized by deposits at the reporting institution.

• In column G–20% risk weight, include the carrying value of the guaranteed portion of

FHA and VA mortgage loans HFI included in Schedule RC-C, Part I, item 1.c.(2)(a). Also include the portion of any loan HFI which meets the definition of residential mortgage exposure or statutory multifamily mortgage reported in Schedule RC, item 4.b, that is secured by collateral or has a guarantee that qualifies for the 20 percent risk weight. This would include the portion of loans HFI covered by an FDIC loss-sharing agreement.

• In column H–50% risk weight, include the carrying value of loans HFI secured by

1-4 family residential properties included in Schedule RC-C, Part I, item 1.c.(1) (only include qualifying first mortgage loans); qualifying loans from Schedule RC-C, Part I, items 1.c.(2)(a) and 1.d; and those loans that meet the definition of a residential mortgage exposure and qualify for 50 percent risk weight under §.32(g) of the regulatory capital rules. For residential mortgage exposures, the loans must be prudently underwritten, be fully secured by first liens on 1-4 family residential properties (regardless of the original and outstanding amount of the loan) or multifamily residential properties (with an original and outstanding amount of $1 million or less), not 90 days or more past due or in nonaccrual status, and have not been restructured or modified (unless modified or restructured solely pursuant to the U.S. Treasury’s Home Affordable Mortgage Program (HAMP)). Also include loans HFI that meet the definition of statutory multifamily mortgage in §.2 of the regulatory capital rules. Also include the portion of any loan HFI which meets the definition of residential mortgage exposure reported in Schedule RC, item 4.b, that is secured by collateral or has a guarantee that qualifies for the 50 percent risk weight.

Notes: 1. Refer to the definition of “residential mortgage exposure” in §.2 of the regulatory

capital rules, and refer to the requirements for risk weighting residential mortgage loans in §.32 of the regulatory capital rules.

2. A residential mortgage loan may receive a 50 percent risk weight if it meets the qualifying criteria in §.32(g) of the regulatory capital rules: o A property is owner-occupied or rented; o The loan is prudently underwritten including the loan amount as a percentage of the

appraised value of the real estate collateral. o The loan is not 90 days or more past due or on nonaccrual; o The loan is not restructured or modified (except for loans restructured solely pursuant

to the U.S. Treasury’s HAMP).

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Part II. (cont.) Item No. Caption and Instructions 5.a ○ If the bank holds the first lien and junior lien(s) on a residential mortgage exposure, (cont.) and no other party holds an intervening lien, the bank must combine the exposures

and treat them as a single first-lien residential mortgage exposure. 3. A first lien home equity line (HELOC) may qualify for 50 percent risk weight if it meets

the qualifying criteria in §.32(g) listed above. 4. A residential mortgage loan of $1 million or less on a property of more than 4 units

may qualify for 50 percent risk weight if it meets the qualifying criteria in §.32(g) listed above.

• In column I–100% risk weight, include the carrying value of loans HFI related to residential mortgages exposures reported in Schedule RC, item 4.b, that are not included in columns C, G, H, or R. Include loans HFI that are junior lien residential mortgage exposures if the bank does not hold the first lien on the property, except the portion of any junior lien residential mortgage exposure that is secured by collateral or has a guarantee that qualifies for the zero percent, 20 percent, or 50 percent risk weight. Also include loans HFI that are residential mortgage exposures that have been restructured or modified, except

○ Those loans restructured or modified solely pursuant to the U.S. Treasury’s HAMP, and

o The portion of any restructured or modified residential mortgage exposure that is secured by collateral or has a guarantee that qualifies for the zero percent, 20 percent, or 50 percent risk weight.

• In columns R and S–Application of Other Risk-Weighting Approaches, include the portion

of any loan HFI reported in Schedule RC, item 4.b, that meets the definition of residential mortgage exposure or statutory multifamily mortgage and is secured by qualifying financial collateral that meets the definition of a securitization exposure in §.2 of the regulatory capital rules or is a mutual fund only if the bank chooses to recognize the risk-mitigating effects of the securitization exposure or mutual fund collateral under the Simple Approach outlined in §.37 of the regulatory capital rules. Under the Simple Approach, the risk weight assigned to the collateralized portion of the exposure may not be less than 20 percent. For information on the reporting of such HFI exposures in columns R and S, refer to the instructions for Schedule RC-R, Part, II, item 5.a, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

5.b High volatility commercial real estate exposures. Report in column A the portion of the

carrying value of loans HFI reported in Schedule RC, item 4.b, that are high volatility commercial real estate (HVCRE) exposures,1 including HVCRE exposures that are 90 days or more past due or in nonaccrual status.

• In column B, an institution that has adopted the current expected credit losses

methodology (CECL) should include as a positive number the portion of Schedule RC-R, Part II, Memorandum item 4.a, “Amount of allowances for credit losses on purchased credit-deteriorated assets” for loans and leases held for investment that are applicable to purchased credit-deteriorated high volatility commercial real estate exposures.

• In column C–0% risk weight, include the portion of any HVCRE exposure included in

loans and leases HFI, that is secured by collateral or has a guarantee that qualifies for the zero percent risk weight. This would include the portion of HVCRE loans HFI collateralized by deposits at the reporting institution.

1 See the instructions for Schedule RC-R, Part II, item 4.b, above for the definition of HVCRE exposure.

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Part II. (cont.) Item No. Caption and Instructions 7 ○ Also include the portion of the fair value of any trading assets that is secured by (cont.) collateral or has a guarantee that qualifies for the zero percent risk weight. This

would include the portion of trading assets collateralized by deposits at the reporting institution.

• In column G–20% risk weight,

o include the portion of the amount reported in Schedule RC, item 5, that qualifies for the 20 percent risk weight and are not securitization exposures, which may include the fair value of securities issued by U.S. Government-sponsored agencies; general obligations issued by states and political subdivisions in the United States; MBS issued by FNMA and FHLMC; and asset-backed securities, structured financial products, other debt securities, loans and acceptances, and certificates of deposit that represent exposures to U.S. depository institutions.

o Also include the portion of the fair value of any trading assets that is secured by collateral or has a guarantee that qualifies for the 20 percent risk weight. This would include the portion of trading assets covered by FDIC loss-sharing agreements.

• In column H–50% risk weight,

o include the portion of the amount reported in Schedule RC, item 5, that qualifies for the 50 percent risk weight and are not securitization exposures, which may include the fair value of revenue obligations issued by states and political subdivisions in the United States and MBS.

o Also include the portion of the fair value of any trading assets that is secured by collateral or has a guarantee that qualifies for the 50 percent risk weight.

• In column I–100% risk weight, include the portion of the amount reported in

Schedule RC, item 5, that qualifies for the 100 percent risk weight and are not securitization exposures, which may include the fair value of MBS and other debt securities that represent exposures to corporate entities and special purpose vehicles (SPVs). o Also include the fair value of publicly traded and not publicly traded equity exposures

and equity exposures to investment funds (including mutual funds) reported in Schedule RC, item 5, to the extent that the aggregate carrying value of the bank’s equity exposures does not exceed 10 percent of total capital. If the bank’s aggregate carrying value of equity exposures is greater than 10 percent of total capital, the bank must report its trading equity exposures in columns L, M, or N, as appropriate.

o Also include the fair value of trading assets reported in Schedule RC, item 5, that is not included in columns C through H, J through N, and R. Exclude those trading assets reported in Schedule RC, item 5, that qualify as securitization exposures and report them in Schedule RC-R, Part II, item 9.c.

o Also include the portion of the fair value of any trading assets that is secured by collateral or has a guarantee that qualifies for the 100 percent risk weight.

• In column J–150% risk weight, include:

o The exposure amounts of trading assets reported in Schedule RC, item 5, that are past due 90 days or more or in nonaccrual status (except sovereign exposures), excluding those portions that are covered by qualifying collateral or eligible guarantees as described in §.37 and §.36, respectively, of the regulatory capital rules.

o The fair value of high volatility commercial real estate exposures, as defined in §.2 of the regulatory capital rules, included in Schedule RC, item 5, excluding those portions that are covered by qualifying collateral or eligible guarantees as described in §.37 and §.36, respectively, of the regulatory capital rules.

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Part II. (cont.) Item No. Caption and Instructions

7 • In column L–300% risk weight, include the portion of the amount reported in (cont.) Schedule RC, item 5, that does not qualify as securitization exposures that represents

the fair value of publicly traded equity securities with readily determinable fair values.

• In column M–400% risk weight, include the portion of the amount reported in Schedule RC, item 5, that does not qualify as securitization exposures that represents the fair value of equity securities (other than those issued by investment firms) that do not have readily determinable fair values.

• In column N–600% risk weight, include the portion of the amount reported in

Schedule RC, item 5, that does not qualify as securitization exposures that represents the fair value of equity exposures to investment firms.

• In columns R and S–Application of Other Risk-Weighting Approaches, include:

○ The portion of any trading assets reported in Schedule RC, item 5, that is secured by qualifying financial collateral that meets the definition of a securitization exposure in §.2 of the regulatory capital rules or is a mutual fund only if the bank chooses to recognize the risk-mitigating effects of the securitization exposure or mutual fund collateral under the Simple Approach outlined in §.37 of the regulatory capital rules. Under the Simple Approach, the risk weight assigned to the collateralized portion of the exposure may not be less than 20 percent.

o Equity exposures to investment funds (including mutual funds) reported as trading assets in Schedule RC, item 5, if the aggregate carrying value of the bank’s equity exposures is greater than 10 percent of total capital. These exposures are subject to a minimum risk weight of 20 percent.

o For information on the reporting of such trading assets in columns R and S, refer to the instructions for Schedule RC-R, Part, II, item 7, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

• For trading assets that must be risk-weighted according to the Country Risk Classification

(CRC) methodology, assign these assets to risk-weight categories based on the CRC methodology described in the General Instructions for Schedule RC-R, Part II, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

8 All other assets. Report in column A the sum of the amounts reported in Schedule RC,

item 6, "Premises and fixed assets”; item 7, "Other real estate owned”; item 8, "Investments in unconsolidated subsidiaries and associated companies”; item 9, “Direct and indirect investments in real estate ventures”; item 10, "Intangible assets"; and item 11, "Other assets," excluding those assets reported in Schedule RC, items 6 through 11, that qualify as securitization exposures as defined in §.2 of the regulatory capital rules. The amount of those assets reported in Schedule RC, items 6 through 11, that qualify as securitization exposures (as well as the amount reported in Schedule RC, item 11, for accrued interest receivable on on-balance sheet securitization exposures, regardless of where the securitization exposures are reported on the balance sheet in Schedule RC) must be reported in Schedule RC-R, Part II, item 9.d, column A.

The sum of item 8, columns B through R (including items 8.a and 8.b, column R), must equal

item 8, column A. Amounts reported in Schedule RC-R, Part II, items 8.a and 8.b, column R, should not also be reported in Schedule RC-R, Part II, item 8, column R.

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Part II. (cont.) Item No. Caption and Instructions 8 Treatment of Defined Benefit Postretirement Plan Assets – Applicable Only to Banks That (cont.) Have Made the Accumulated Other Comprehensive Income (AOCI) Opt-Out Election in

Schedule RC-R, Part I, item 3.a If the reporting institution sponsors a single-employer defined benefit postretirement plan,

such as a pension plan or health care plan, accounted for in accordance with ASC Topic 715, Compensation-Retirement Benefits (formerly FASB Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”), the institution should adjust the asset amount reported in column A of this item for any amounts included in Schedule RC, item 26.b, “Accumulated other comprehensive income,” affecting assets as a result of the initial and subsequent application of the funded status and measurement date provisions of ASC Topic 715. The adjustment also should take into account subsequent amortization of these amounts from AOCI into earnings. The intent of the adjustment reported in this item (together with the amount reported in Schedule RC-R, Part I, item 9.d) is to reverse the effects on AOCI of applying ASC Topic 715 for regulatory capital purposes. Specifically, assets recognized or derecognized as an adjustment to AOCI as part of the incremental effect of applying ASC Topic 715 should be reported as an adjustment to assets in column B of this item. For example, the derecognition of an asset recorded as an offset to AOCI as part of the initial incremental effect of applying ASC Topic 715 should be reported in this item as a negative amount in column B and as a positive amount in column I. As another example, the portion of a benefit plan surplus asset that is included in Schedule RC, item 26.b, as an increase to AOCI and in column A of this item should be excluded from risk-weighted assets by reporting the amount as a positive number in column B of this item.

• In column B, include the amount of:

o Any goodwill reported in Schedule RC-M, item 2.b, without regard to any associated DTLs;

o Intangible assets (other than goodwill and mortgage servicing assets (MSAs)) reported as a deduction from common equity tier 1 capital in Schedule RC-R, Part I, item 7, without regard to any associated DTLs;

o Deferred tax assets (DTAs) that arise from net operating loss and tax credit carryforwards, net of any related valuation allowances and net of DTLs reported in Schedule RC-R, Part I, item 8;

o The fair value of over-the-counter derivative contracts (as defined in §.2 of the regulatory capital rules) and derivative contracts that are cleared transactions (as described in §.2 of the regulatory capital rules) that are reported as assets in Schedule RC, item 11 (banks should risk weight the credit equivalent amount of these derivative contracts in Schedule RC-R, Part II, item 20 or 21, as appropriate); Note: The fair value of derivative contracts reported as assets in Schedule RC,

item 11, that are neither over-the-counter derivative contracts nor derivative contracts that are cleared transactions under §.2 of the regulatory capital rules should not be reported in column B. Such derivative contracts include written option contracts, including so-called “derivative loan commitments,” i.e., a lender’s commitment to originate a mortgage loan that will be held for resale. The fair value of such derivative contracts should be reported in the appropriate risk-weight category in this item 8.

o Investments in the capital of unconsolidated financial institutions that are reported in Schedule RC, item 8 or item 11, and have been deducted from capital in Schedule RC-R, Part I, item 13, item 24, and item 45.

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Part II. (cont.) Item No. Caption and Instructions

8 ○ Items subject to the 25 percent common equity tier 1 capital threshold limitations (cont.) that have been deducted for risk-based capital purposes in Schedule RC-R, Part I,

items 13 through 15. These excess amounts pertain to three items: Investments in the capital of unconsolidated financial institutions; ▪ MSAs; and

▪ DTAs arising from temporary differences that could not be realized through net operating loss carrybacks, net of related valuation allowances; and

o Unsettled transactions (failed trades) that are reported as “Other assets” in Schedule RC, item 11. For purposes of risk weighting, unsettled transactions are to be reported in Schedule RC-R, Part II, item 22.

An institution that has adopted the current expected credit losses methodology (CECL) should report as a negative number in column B: o The portion of Schedule RI-B, Part II, Memorandum item 6, “Allowance for credit

losses on other financial assets measured at amortized cost,” that relates to assets reported in column A of this item, less

o The portion of Schedule RC-R, Part II, Memorandum item 4.c, “Amount of allowances for credit losses on purchased credit-deteriorated assets” for other financial assets measured at amortized cost that relates to assets reported in column A of this item.

For example, if an institution reports $100 in Schedule RI-B, Part II, Memorandum item 6 (and the entire amount relates to assets reported in this item 8, column A), and $10 in Schedule RC-R, Part II, Memorandum item 4.c (and the entire amount relates to assets reported in this item 8, column A), the institution would report ($90) in this column B. An institution that has adopted CECL and has elected to apply the 3-year CECL transition provision (3-year CECL electing institution) should report as a positive number in column B its applicable DTA transitional amount from temporary difference DTAs, in accordance with section 301 of the regulatory capital rules. Specifically, a 3-year CECL electing institution reduces its temporary difference DTAs by 75 percent of its DTA transitional amount during the first year of the transition period, 50 percent of its DTA transitional amount during the second year of the transition period, and 25 percent of its DTA transitional amount during the third year of the transition period.

Report as a negative number in column B the amount of default fund contributions in the

form of commitments made by a clearing member to a central counterparty’s mutualized loss-sharing arrangement.

• In column C–0% risk weight, include: ○ The carrying value of Federal Reserve Bank stock included in Schedule RC-F,

item 4; o Accrued interest receivable on assets included in the zero percent risk weight

category (column C of Schedule RC-R, Part II, items 1 through 7); o The carrying value of gold bullion not held for trading that is held in the bank's own

vault or in another bank's vault on an allocated basis, and exposures that arise from the settlement of cash transactions (such as equities, fixed income, spot foreign exchange, and spot commodities) with a central counterparty where there is no assumption of ongoing credit risk by the central counterparty after settlement of the trade and associated default fund contributions; and

○ The portion of assets reported in Schedule RC, items 6 through 11, that is secured by collateral or has a guarantee that qualifies for the zero percent risk weight. This would include the portion of these assets collateralized by deposits in the reporting institution.

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Part II. (cont.) Item No. Caption and Instructions 14 • In column I–100% risk weight, include the portion of the credit equivalent amount (cont.) reported in column B that is not included in columns C through H and J. Also include the

credit equivalent amount of the portion of commercial or similar letters of credit with an original maturity of one year or less reported in Schedule RC-L, item 4, that are secured by collateral or has a guarantee that qualifies for the 100 percent risk weight.

• For commercial and similar letters of credit that must be risk weighted according to the

Country Risk Classification (CRC) methodology, including commercial and similar letters of credit (and self-liquidating, trade-related contingent items that arise from the movement of goods) with an original maturity of one year or less that have been conveyed to foreign banks, assign the credit equivalent amount of the portion of such letters of credit to risk-weight categories based on the CRC methodology described in the instructions for Schedule RC-R, Part, II, item 14, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

15 Retained recourse on small business obligations sold with recourse. Report in

column A the amount of retained recourse on small business obligations reported in Schedule SU, items 4 and 5, that do not meet the definition of a securitization exposure as described in §.2 of the regulatory capital rules. For retained recourse on small business obligations sold with recourse that qualify as securitization exposures, please see §.42(h) of the regulatory capital rule for purposes of risk weighting and report these exposures in Schedule RC-R, Part II, item 10.

Under Section 208 of the Riegle Community Development and Regulatory Improvement Act of 1994, a "qualifying institution" that transfers small business loans and leases on personal property (small business obligations) with recourse in a transaction that qualifies as a sale under generally accepted accounting principles (GAAP) must maintain risk-based capital only against the amount of recourse retained, provided the institution establishes a recourse liability account that is sufficient under GAAP. Only loans and leases to businesses that meet the criteria for a small business concern established by the Small Business Administration under Section 3(a) of the Small Business Act (15 U.S.C. 632 et seq.) are eligible for this favorable risk-based capital treatment.

In general, a "qualifying institution" is one that is well capitalized without regard to the Section 208 provisions. If a bank ceases to be a qualifying institution or exceeds the retained recourse limit set forth in banking agency regulations implementing Section 208, all new transfers of small business obligations with recourse would not be treated as sales. However, the reporting and risk-based capital treatment described above will continue to apply to any transfers of small business obligations with recourse that were consummated during the time the bank was a "qualifying institution" and did not exceed the limit.

• In column B, report 100 percent of the amount reported in column A. • In column C–0% risk weight, include the credit equivalent amount of the portion of

retained recourse on small business obligations sold with recourse reported in Schedule SU, items 4 and 5, that are secured by collateral or has a guarantee that qualifies for the zero percent risk weight.

• In column G–20% risk weight, include the credit equivalent amount of the portion of

retained recourse on small business obligations sold with recourse reported in Schedule SU, items 4 and 5, that are secured by collateral or has a guarantee that qualifies for the 20 percent risk weight.

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Part II. (cont.) Item No. Caption and Instructions 15 • In column H–50% risk weight, include the credit equivalent amount of the portion of (cont.) retained recourse on small business obligations sold with recourse reported in

Schedule SU, items 4 and 5, that are secured by collateral or has a guarantee that qualifies for the 50 percent risk weight.

• In column I-100% risk weight, include the portion of the credit equivalent amount reported

in column B that is not included in columns C through H and J. Also include the credit equivalent amount of the portion of retained recourse on small business obligations sold with recourse reported in Schedule SU, items 4 and 5, that are secured by collateral or has a guarantee that qualifies for the 100 percent risk weight.

16 Repo-style transactions. Repo-style transactions include:

• Securities lending transactions, including transactions in which the bank acts agent for a customer and indemnifies the customer against loss. Securities lent are reported in Schedule RC-L, item 6.a.

• Securities borrowing transactions. Securities borrowed are reported in Schedule RC-L, item 6.b.

• Securities purchased under agreements to resell (i.e., reverse repos). Securities purchased under agreements to resell are reported in Schedule RC, item 3.b.

• Securities sold under agreements to repurchase (i.e., repos). Securities sold under agreements to repurchase are reported in Schedule RC, item 14.b.1

Report in column A the exposure amount of repo-style transactions that do not meet the

definition of a securitization exposure as described in §.2 of the regulatory capital rules. For repo-style transactions to which the bank applies the Simple Approach to recognize the

risk-mitigating effects of qualifying financial collateral, as outlined in §.37 of the regulatory capital rules, the exposure amount to be reported in column A is the sum of the fair value as of the report date of securities the bank has lent,2 the amount of cash or the fair value as of the report date of other collateral the bank has posted for securities borrowed, the amount of cash provided to the counterparty for securities purchased under agreements to resell (as reported in Schedule RC, item 3.b), and the fair value as of the report date of securities sold under agreements to repurchase.

For repo-style transactions to which the bank applies the Collateral Haircut Approach to

recognize the risk-mitigating effects of qualifying financial collateral, as outlined in §.37 of the regulatory capital rules, the exposure amount to be reported in column A for a repo-style transaction or a single-product netting set of such transactions is determined by using the exposure amount equation in §.37(c) of the regulatory capital rules.

A bank may apply either the Simple Approach or the Collateral Haircut Approach to repo-

style transactions; however, the bank must use the same approach for similar exposures or transactions. For further information, see the discussion of “Treatment of Collateral and Guarantees” in the General Instructions for Schedule RC-R, Part II.

1 Although securities purchased under agreements to resell and securities sold under agreements to repurchase are reported on the balance sheet (Schedule RC) as assets and liabilities, respectively, they are included with securities lent and securities borrowed and designated as repo-style transactions that are treated collectively as off-balance sheet items under the regulatory capital rules. 2 For held-to-maturity securities that have been lent, the amortized cost of these securities is reported in Schedule RC-L, item 6.a, but the fair value of these securities should be reported as the exposure amount in column A of this item.

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Part II. (cont.) Item No. Caption and Instructions 16 • In column B, report 100 percent of the exposure amount reported in column A. (cont.)

• In column C–0% risk weight, include the credit equivalent amount of repo-style transactions that are supported by the appropriate amount of collateral that qualifies for the zero percent risk weight under the regulatory capital rules (refer to §.37 of the regulatory capital rules).

• In column D–2% risk weight, include the credit equivalent amount of centrally cleared

repo-style transactions with Qualified Central Counterparties (QCCPs), as defined in §.2 and described in §.35 of the regulatory capital rules.

• In column E–4% risk weight, include the credit equivalent amount of centrally cleared

repo-style transactions with QCCPs in all other cases that do not meet the criteria of qualification for a 2 percent risk weight, as described in §.35 of the regulatory capital rules.

• In column G–20% risk weight, include the credit equivalent amount of repo-style

transactions that are supported by the appropriate amount of collateral that qualifies for the 20 percent risk weight under the regulatory capital rules. Also include the credit equivalent amount of repo-style transactions that represents exposures to U.S. depository institutions.

• In column H–50% risk weight, include the credit equivalent amount of repo-style transactions that are supported by the appropriate amount of collateral that qualifies for the 50 percent risk weight under the regulatory capital rules.

• In column I-100% risk weight, include the portion of the credit equivalent amount reported

in column B that is not included in columns C through H, J, and R. Also include the credit equivalent amount of repo-style transactions that are supported by the appropriate amount of collateral that qualifies for the 100 percent risk weight under the regulatory capital rules.

• In column J–150% risk weight, include the credit equivalent amount of repo-style

transactions that are supported by the appropriate amount of collateral that qualifies for the 150 percent risk weight under the regulatory capital rules.

• In columns R and S–Application of Other Risk-Weighting Approaches, include the portion

of repo-style transactions that is secured by qualifying financial collateral that meets the definition of a securitization exposure in §.2 of the regulatory capital rules or is a mutual fund only if the bank chooses to recognize the risk-mitigating effects of the securitization exposure collateral under the Simple Approach or the Collateral Haircut Approach outlined in §.37 of the regulatory capital rules. Under the Simple Approach, the risk weight assigned to the collateralized portion of the repo-style exposure may not be less than 20 percent. For information on the reporting of such repo-style transactions in columns R and S, refer to the instructions for Schedule RC-R, Part, II, item 16, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

• For repo-style transactions that represent exposures to foreign central banks and foreign banks that must be risk weighted according to the Country Risk Classification (CRC) methodology, assign the credit equivalent amount of these exposures to risk-weight categories based on the CRC methodology described in instructions for Schedule RC-R, Part, II, item 16, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

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Part II. (cont.) Item No. Caption and Instructions 16 Examples: Reporting Securities Sold Under Agreements to Repurchase (Repos) under the (cont.) Simple Approach for Recognizing the Effects of Collateral §.37 of the regulatory capital rules provides for the recognition of the risk-mitigating effects of

collateral when risk weighting assets collateralized by financial collateral (which is defined in §.2 of the regulatory capital rules). The following examples illustrate the calculation of risk-weighted assets and the reporting of securities sold under agreements to repurchase (repos) in Schedule RC-R, Part II, item 16, using the Simple Approach.

Example 1: Security sold under an agreement to repurchase fully collateralized by cash A bank has transferred an available-for-sale (AFS) debt security to a counterparty in a repo

transaction that is accounted for as a secured borrowing on the bank’s balance sheet. The bank received $100 in cash from the repo counterparty in this transaction. The amortized cost and the fair value of the AFS debt security are both $100 as of the report date.1 The debt security is an exposure to a U.S. government-sponsored entity (GSE) that qualifies for a 20 percent risk weight. The repo counterparty is a company that would receive a 100 percent risk weight.

Calculation of risk-weighted assets for the transaction: 1. The bank continues to report the AFS GSE debt security as an asset on its balance sheet

and to risk weight the security as an on-balance sheet asset at 20 percent:2 $100 x 20% = $20 2. The bank has a $100 exposure to the repo counterparty (the report date fair value of the

security transferred to the counterparty) that is collateralized by the $100 of cash received from the counterparty. The bank risk weights its exposure to the repo counterparty at zero percent in recognition of the cash received in the transaction from the counterparty: $100 x 0% = $0

3. There is no additional exposure to the repo counterparty to risk weight because the exposure to the counterparty is fully collateralized by the cash received.

The total risk-weighted assets arising from the transaction: $20 The bank would report the transaction in Schedule RC-R, Part II, as follows: 1. The bank reports the AFS debt security in item 2.b: a. The $100 carrying value (i.e., the fair value) of the AFS debt security on the balance

sheet will be reported in column A.3 b. The $100 exposure amount of the AFS debt security will be reported in column G–

20% risk weight (which is the applicable risk weight for a U.S. GSE debt security).

2. The bank reports the repurchase agreement in item 16: a. The bank’s $100 exposure to the repo counterparty, which is the fair value of the

debt security transferred in the repo transaction, is the exposure amount to be reported in column A.

1 In both Example 1 and Example 2, because the fair value carrying value of the AFS GSE debt security equals the amortized cost of the debt security, a bank that has made the AOCI opt-out election in Schedule RC-R, Part I, item 3.a, does not need to adjust the carrying value (i.e., the fair value) of the debt security to determine the exposure amount of the security. Thus, for a bank that has made the AOCI opt-out election, the carrying value of the AFS debt security equals its exposure amount in Examples 1 and 2. 2 See the footnote above in the instructions for this item 16 that addresses Examples 1 and 2. 3 See the footnote above in the instructions for this item 16 that addresses Examples 1 and 2.

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Part II. (cont.) Item No. Caption and Instructions 16 b. The $100 credit equivalent amount of the bank’s exposure to the repo counterparty (cont.) will be reported in column B. c. Because the bank’s exposure to the repo counterparty is fully collateralized by the

$100 of cash received from the counterparty, the $100 credit equivalent amount of the repurchase agreement will be reported in column C–0% risk weight (which is the applicable risk weight for cash collateral).

(Column A)

Totals From Schedule RC

(Column B)

Adjustments

(Column C) (Column G) (Column I) Allocation by Risk-Weight Category 0% 20% 100%

2.b. Available-for-sale securities $100 $100 2.b.

(Column A)

Face, Notional, or Other Amount

(Column B) Credit

Equivalent Amount

(Column C) (Column G) (Column I) Allocation by Risk-Weight Category 0% 20% 100%

16. Repo-style transactions $100 $100 $100 16.

Example 2: Security sold under an agreement to repurchase (repo) not fully collateralized by

cash A bank has transferred an AFS debt security to a counterparty in a repo transaction that is

accounted for as a secured borrowing on the bank’s balance sheet. The bank received $98 in cash from the repo counterparty in this transaction. The amortized cost and the fair value of the AFS debt security are both $100 as of the report date.1 The debt security is an exposure to a U.S. GSE that qualifies for a 20 percent risk weight. The repo counterparty is a company that would receive a 100 percent risk weight.

Calculation of risk-weighted assets for the transaction: 1. The bank continues to report the AFS GSE debt security as an asset on its balance sheet

and to risk weight the security as an on-balance sheet asset at 20 percent:2 $100 x 20% = $20 2. The bank has a $100 exposure to the repo counterparty (the report date fair value of the

security transferred to the counterparty) of which $98 is collateralized by the cash received from the counterparty. The bank risk weights the portion of its exposure to the repo counterparty that is collateralized by the cash received from the counterparty at zero percent: $98 x 0% = $0

3. The bank risk weights its $2 uncollateralized exposure to the repo counterparty using the risk weight applicable to the counterparty: $2 x 100% = $2

The total risk-weighted assets arising from the transaction: $22

The bank would report the transaction in Schedule RC-R, Part II, as follows: 1. The bank reports the AFS debt security in item 2.b: a. The $100 carrying value (i.e., the fair value) of the AFS debt security on the balance

sheet will be reported in column A.3 1 See the footnote above in the instructions for this item 16 that addresses Examples 1 and 2. 2 See the footnote above in the instructions for this item 16 that addresses Examples 1 and 2.

3 See the footnote above in the instructions for this item 16 that addresses Examples 1 and 2.

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Part II. (cont.) Item No. Caption and Instructions 16 b. The $100 exposure amount of the AFS debt security will be reported in column G– (cont.) 20% risk weight (which is the applicable risk weight for a U.S. GSE debt security). 2. The bank reports the repurchase agreement in item 16: a. The bank’s $100 exposure to the repo counterparty, which is the fair value of the

debt security transferred in the repo transaction, is the exposure amount to be reported in column A.

b. The $100 credit equivalent amount of the bank’s exposure to the repo counterparty will be reported in column B.

c. Because the bank’s exposure to the repo counterparty is collateralized by the $98 of cash received from the counterparty, $98 of the $100 credit equivalent amount of the repurchase agreement will be reported in column C–0% risk weight (which is the applicable risk weight for cash collateral).

d. The $2 uncollateralized exposure to the repo counterparty will be reported in column I–100% risk weight (which is the applicable risk weight for the repo counterparty).

(Column A) Totals From

Schedule RC

(Column B)

Adjustments

(Column C) (Column G) (Column I) Allocation by Risk-Weight Category 0% 20% 100%

2.b. Available-for-sale securities $100 $100 2.b.

(Column A)

Face, Notional, or Other Amount

(Column B) Credit

Equivalent Amount

(Column C) (Column G) (Column I) Allocation by Risk-Weight Category 0% 20% 100%

16. Repo-style transactions $100 $100 $98 $2 16.

17 All other off-balance sheet liabilities. Report in column A:

• The notional amount of all other off-balance sheet liabilities reported in Schedule RC-L, item 9, that are covered by the regulatory capital rules,

• The face amount of risk participations in bankers acceptances that have been acquired by the reporting institution and are outstanding,

• The full amount of loans or other assets sold with credit-enhancing representations and warranties1 that do not meet the definition of a securitization exposure as described in §.2 of the regulatory capital rules,

• The notional amount of written option contracts that act as financial guarantees that do not meet the definition of a securitization exposure as described in §.2 of the regulatory capital rules, and

• The notional amount of all forward agreements, which are defined as legally binding contractual obligations to purchase assets with certain drawdown at a specified future date, not including commitments to make residential mortgage loans or forward foreign exchange contracts.

1 The definition of credit-enhancing representations and warranties in §.2 of the regulatory capital rules states that such representations and warranties obligate an institution “to protect another party from losses arising from the credit risk of the underlying exposures” and “include provisions to protect a party from losses resulting from the default or nonperformance of the counterparties of the underlying exposures or from an insufficiency in the value of the collateral backing the underlying exposures.” Thus, when loans or other assets are sold “with recourse” and the recourse arrangement provides protection from losses as described in the preceding definition, the recourse arrangement constitutes a credit-enhancing representation and warranty.

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Part II. (cont.) Item No. Caption and Instructions 18.b • In column J–150% risk weight, include the credit equivalent amount of unused (cont.) commitments and commercial and similar letters of credit to counterparties who meet,

or that have guarantees or collateral that meets, the criteria for the 150 percent risk weight category as described in the instructions for Risk-Weighted Assets and for Schedule RC-R, Part II, items 1 through 8, above.

• In columns R and S–Application of Other Risk-Weighting Approaches, include the portion of unused commitments that is secured by qualifying financial collateral that meets the definition of a securitization exposure in §.2 of the regulatory capital rules or is a mutual fund only if the bank chooses to recognize the risk-mitigating effects of the securitization exposure or mutual fund collateral under the Simple Approach outlined in §.37 of the regulatory capital rules. Under the Simple Approach, the risk weight assigned to the collateralized portion of an unused commitment may not be less than 20 percent. For information on the reporting of such unused commitments in columns R and S, refer to the instructions for Schedule RC-R, Part, II, item 18.b, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

• For unused commitments with an original maturity exceeding one year that represent exposures to foreign banks, and commercial and similar letters of credit with an original maturity exceeding one year that have been conveyed to foreign banks, that must be risk weighted according to the Country Risk Classification (CRC) methodology, assign the credit equivalent amount of these exposures to risk-weight categories based on the CRC methodology described in instructions for Schedule RC-R, Part, II, item 18.a, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

19 Unconditionally cancelable commitments. Report the unused portion of those

unconditionally cancelable commitments reported in Schedule RC-L, item 1, that are subject to the regulatory capital rules. The unused portion of commitments (facilities) that are unconditionally cancelable (without cause) at any time by the bank (to the extent permitted by applicable law) have a zero percent credit conversion factor. The bank should report the unused portion of such commitments in column A of this item and zero in column B of this item.

In the case of consumer home equity or mortgage lines of credit secured by liens on

1-4 family residential properties, a bank is deemed able to unconditionally cancel the commitment if, at its option, it can prohibit additional extensions of credit, reduce the credit line, and terminate the commitment to the full extent permitted by relevant federal law. Retail credit cards and related plans, including overdraft checking plans and overdraft protection programs, are defined to be short-term commitments that should be converted at zero percent and included in this item if the bank has the unconditional right to cancel the line of credit at any time in accordance with applicable law.

20 Over-the-counter derivatives. Report in column B the credit equivalent amount of over-the-

counter derivative contracts covered by the regulatory capital rules. As defined in §.2 of the regulatory capital rules, an over-the-counter (OTC) derivative contract is a derivative contract that is not a cleared transaction.1 Include OTC credit derivative contracts held for trading

1 An OTC derivative includes a transaction: (1) Between an institution that is a clearing member and a counterparty where the institution is acting as a financial

intermediary and enters into a cleared transaction with a central counterparty (CCP) that offsets the transaction with the counterparty; or

(2) In which an institution that is a clearing member provides a CCP a guarantee on the performance of the counterparty to the transaction.

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Part II. (cont.) Item No. Caption and Instructions 20 purposes and subject to the market risk capital rule. Include the client-facing leg of a (cont.) derivative contract cleared through a central counterparty or a qualified central counterparty,

which is to be reported as an over-the-counter derivative. Otherwise, do not include the credit equivalent amount of centrally cleared derivative contracts, which must be reported in Schedule RC-R, Part II, item 21. Do not include OTC derivative contracts that meet the definition of a securitization exposure as described in §.2 of the regulatory capital rules; such derivative contracts must be reported in Schedule RC-R, Part II, item 10.

The credit equivalent amount of an OTC derivative contract to be reported in column B is

determined under one of two methods, the current exposure method (CEM), as described in §.34(b) of the regulatory capital rules, or the standardized approach for counterparty credit risk (SA-CCR), as described in §.132(c) of the regulatory capital rules. Under the regulatory capital rules, a non-advanced approaches institution may elect to use CEM or SA-CCR to determine the credit equivalent amount of an OTC derivative contract, as of April 1, 2020. A non-advanced approaches institution must notify its appropriate federal banking supervisor before using SA-CCR. A non-advanced approaches institution must use the same methodology – CEM or SA-CCR – to calculate the exposure amount for all its derivative contracts, including centrally cleared derivative transactions, and may change its election only with the prior approval of its appropriate federal banking supervisor.

For further information on the use of SA-CCR in relation to OTC derivative contracts, refer to

the instructions for Schedule RC-R, Part II, item 20, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

When using CEM, the credit equivalent amount of an OTC derivative contract to be reported

in column B is the sum of its current credit exposure (as reported in Schedule RC-R, Part II, Memorandum item 1) plus the potential future exposure (PFE) over the remaining life of the derivative contract (regardless of its current credit exposure, if any), as described in §.34 of the regulatory capital rules. The current credit exposure of a derivative contract is (1) the fair value of the contract when that fair value is positive and (2) zero when the fair value of the contract is negative or zero. The PFE of a derivative contract, which is based on the type of contract and the contract's remaining maturity, is determined by multiplying the notional principal amount of the contract by the appropriate conversion factor from the following chart.

The notional principal amounts of the reporting bank's OTC derivatives that are subject to the

risk-based capital requirements are reported by remaining maturity in Schedule RC-R, Part II, Memorandum items 2.a through 2.g.

Remaining Maturity Interest Rate

Foreign exchange rate and

gold

Credit (investment

grade reference assets)

Credit (non-investment grade reference assets)

Equity

Precious metals (except gold)

Other

One year or less 0.0% 1.0% 5.0% 10.0% 6.0% 7.0% 10.0% Greater than one year & less than or equal to five years

0.5% 5.0% 5.0% 10.0% 8.0% 7.0% 12.0%

Greater than five years 1.5% 7.5% 5.0% 10.0% 10.0% 8.0% 15.0%

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Part II. (cont.) Item No. Caption and Instructions 20 Under the banking agencies' regulatory capital rules and for purposes of Schedule RC-R, (cont.) Part II, the existence of a legally enforceable bilateral netting agreement between the

reporting bank and a counterparty may be taken into consideration when determining both the current credit exposure and the potential future exposure of derivative contracts. For further information on the treatment of bilateral netting agreements covering derivative contracts, refer to the instructions for Schedule RC-R, Part II, Memorandum item 1, and §.34 of the regulatory capital rules.

When assigning OTC derivative exposures to risk-weight categories, banks can recognize

the risk-mitigating effects of financial collateral by using either the Simple Approach or the Collateral Haircut Approach, as described in §.37 of the regulatory capital rules.

• In column C–0% risk weight, include the credit equivalent amount of OTC derivative

contracts with counterparties who meet, or that have guarantees or collateral that meets, the criteria for the zero percent risk weight category as described in the instructions for Risk-Weighted Assets and for Schedule RC-R, Part II, items 1 through 8, above. This includes OTC derivative contracts that are marked-to-market on a daily basis and subject to a daily margin maintenance requirement, to the extent the contracts are collateralized by cash on deposit at the reporting institution.

• In column F–10% risk weight, include the credit equivalent amount of OTC derivative

contracts that are marked-to-market on a daily basis and subject to a daily margin maintenance requirement, to the extent the contracts are collateralized by a sovereign exposure that qualifies for a zero percent risk weight under §.32 of the regulatory capital rules.

• In column G–20% risk weight, include the credit equivalent amount of OTC derivative

contracts with counterparties who meet, or that have guarantees or collateral that meets, the criteria for the 20 percent risk weight category as described in the instructions for Risk-Weighted Assets and for Schedule RC-R, Part II, items 1 through 8, above.

• In column H–50% risk weight, include the credit equivalent amount of OTC derivative

contracts with counterparties who meet, or that have guarantees or collateral that meets, the criteria for the 50 percent risk weight category as described in the instructions for Risk-Weighted Assets and for Schedule RC-R, Part II, items 1 through 8, above.

• In column I–100% risk weight, include the credit equivalent amount of OTC derivative

contracts with counterparties who meet, or that have guarantees or collateral that meets, the criteria for the 100 percent risk weight category as described in the instructions for Risk-Weighted Assets and for Schedule RC-R, Part II, items 1 through 8, above. Also include the portion of the credit equivalent amount reported in column B that is not included in columns C through H, J, and R.

• In column J–150% risk weight, include the credit equivalent amount of OTC derivative

contracts with counterparties who meet, or that have guarantees or collateral that meets, the criteria for the 150 percent risk weight category as described in the instructions for Risk-Weighted Assets and for Schedule RC-R, Part II, items 1 through 8, above.

• In columns R and S–Application of Other Risk-Weighting Approaches, include the portion of OTC derivative contracts that is secured by qualifying financial collateral that meets the definition of a securitization exposure in §.2 of the regulatory capital rules or is a mutual

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Part II. (cont.) Item No. Caption and Instructions 20 fund only if the bank chooses to recognize the risk-mitigating effects of the securitization (cont.) exposure or mutual fund collateral under the Simple Approach or the Collateral Haircut

Approach outlined in §.37 of the regulatory capital rules. Under the Simple Approach, the risk weight assigned to the collateralized portion of the OTC derivative exposure may not be less than 20 percent. For information on the reporting of such OTC derivative exposures in columns R and S, refer to the instructions for Schedule RC-R, Part, II, item 20, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

21 Centrally cleared derivatives. Report in column B the credit equivalent amount of centrally

cleared derivative contracts covered by the regulatory capital rules. As described in §.2 of the regulatory capital rules, a centrally cleared derivative contract is an exposure associated with an outstanding derivative contract that an institution, or an institution that is a clearing member has entered into with a central counterparty (CCP), that is, a transaction that a CCP has accepted. Include centrally cleared credit derivative contracts held for trading purposes that are subject to the market risk capital rule and meet the operational requirements for counterparty credit risk in §.3 of the regulatory capital rules. However, do not include the client-facing leg of a derivative contract cleared through a CCP or a qualified CCP, which is to be reported as an over-the-counter derivative in Schedule RC-R, Part II, item 20. For information on the regulatory capital treatment of settled-to-market contracts, see the discussion of “Treatment of Certain Centrally Cleared Derivative Contracts” in the General Instructions for Schedule RC-R, Part II.

Do not include the credit equivalent amount of over-the-counter derivative contracts, which

must be reported in Schedule RC-R, Part II, item 20. Do not include centrally cleared derivative contracts that meet the definition of a securitization exposure as described in §.2 of the regulatory capital rules; such derivative contracts must be reported in Schedule RC-R, Part II, item 10.

The credit equivalent amount of a centrally cleared derivative contract to be reported in

column B is determined under either §.35 or §.133 of the regulatory capital rules. Under the regulatory capital rules, a non-advanced approaches institution that elects to calculate the exposure amount for its OTC derivative contracts using the standardized approach for counterparty credit risk (SA-CCR), as described in §.132(c), must apply the treatment of cleared transactions under §.133 to its derivative contracts that are cleared transactions and to all default fund contributions associated with such derivative contracts, rather than applying §.35. A non-advanced approaches institution must use the same methodology ‒ the current exposure method (CEM) or SA-CCR ‒ to calculate the exposure amount for all its derivative contracts and may change its election only with the prior approval of its appropriate federal banking supervisor.

For further information on the use of SA-CCR in relation to centrally cleared derivative

contracts, refer to the instructions for Schedule RC-R, Part II, item 21, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

When using CEM, the credit equivalent amount of a centrally cleared derivative contract is

the sum of its current credit exposure (as reported in Schedule RC-R, Memorandum item 1), plus the potential future exposure (PFE) over the remaining life of the derivative contract, plus the fair value of collateral posted by the clearing member client bank and held by the CCP or a clearing member in a manner that is not bankruptcy remote. The current credit exposure of a derivative contract is (1) the fair value of the contract when that fair value is positive and (2) zero when the fair value of the contract is negative or zero. The PFE of a derivative

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Part II. (cont.) Item No. Caption and Instructions 21 contract, which is based on the type of contract and the contract's remaining maturity, is (cont.) determined by multiplying the notional principal amount of the contract by the appropriate

conversion factor from the following chart. The notional principal amounts of the reporting bank's centrally cleared derivatives that are

subject to the risk-based capital requirements are reported by remaining maturity in Schedule RC-R, Part II, Memorandum items 3.a through 3.g.

Remaining Maturity Interest Rate

Foreign exchange rate and

gold

Credit (investment

grade reference assets)

Credit (non-investment grade reference assets)

Equity

Precious metals (except gold)

Other

One year or less 0.0% 1.0% 5.0% 10.0% 6.0% 7.0% 10.0% Greater than one year & less than or equal to five years

0.5% 5.0% 5.0% 10.0% 8.0% 7.0% 12.0%

Greater than five years 1.5% 7.5% 5.0% 10.0% 10.0% 8.0% 15.0%

• In column C–0% risk weight, include the credit equivalent amount of centrally cleared derivative contracts with CCPs and other counterparties who meet, or that have guarantees or collateral that meets, the criteria for the zero percent risk-weight category as described in the instructions for Risk-Weighted Assets and for Schedule RC-R, Part II, items 1 through 8, above.

• In column D–2% risk weight, include the credit equivalent amount of centrally cleared

derivative contracts with Qualified Central Counterparties (QCCPs) where the collateral posted by the bank to the QCCP or clearing member is subject to an arrangement that prevents any losses to the clearing member client due to the joint default or a concurrent insolvency, liquidation, or receivership proceeding of the clearing member and any other clearing member clients of the clearing member; and the clearing member client bank has conducted sufficient legal review to conclude with a well-founded basis (and maintains sufficient written documentation of that legal review) that in the event of a legal challenge (including one resulting from default or from liquidation, insolvency, or receivership proceeding) the relevant court and administrative authorities would find the arrangements to be legal, valid, binding, and enforceable under the law of the relevant jurisdictions. See the definition of QCCP in §.2 of the regulatory capital rules.

• In column E–4% risk weight, include the credit equivalent amount of centrally cleared

derivative contracts with QCCPs in all other cases that do not meet the qualification criteria for a 2 percent risk weight, as described in §.2 of the regulatory capital rules.

• In column G–20% risk weight, include the credit equivalent amount of centrally cleared

derivative contracts with CCPs and other counterparties who meet, or that have guarantees or collateral that meets, the criteria for the 20 percent risk-weight category as described in the instructions for Risk-Weighted Assets and for Schedule RC-R, Part II, items 1 through 8, above.

• In column H–50% risk weight, include the credit equivalent amount of centrally cleared

derivative contracts with CCPs and other counterparties who meet, or that have guarantees or collateral that meets, the criteria for the 50 percent risk-weight category as described in the instructions for Risk-Weighted Assets and for Schedule RC-R, Part II, items 1 through 8, above.

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Part II. (cont.) Item No. Caption and Instructions 21 • In column I–100% risk weight, include the credit equivalent amount of centrally cleared

derivative contracts with CCPs and other counterparties who meet, or that have guarantees or collateral that meets, the criteria for the 100 percent risk-weight category as described in the instructions for Risk-Weighted Assets and for Schedule RC-R, Part II, items 1 through 8, above. Also include the portion of the credit equivalent amount reported in column B that is not included in columns C through H and J.

• In column J–150% risk weight, include the credit equivalent amount of centrally cleared derivative contracts with CCPs and other counterparties who meet, or that have guarantees or collateral that meets, the criteria for the 150 percent risk-weight category as described in the instructions for Risk-Weighted Assets and for Schedule RC-R, Part II, items 1 through 8, above.

22 Unsettled transactions (failed trades). NOTE: This item includes unsettled transactions in

the reporting bank’s trading book and in its banking book. Report as unsettled transactions all on- and off-balance sheet transactions involving securities, foreign exchange instruments, and commodities that have a risk of delayed settlement or delivery, or are already delayed, and against which the reporting bank must hold risk-based capital as described in §.38 of the regulatory capital rules.

For delivery-versus-payment (DvP) transactions1 and payment-versus-payment (PvP) transactions,2 report in column A the positive current exposure of those unsettled transactions with a normal settlement period in which the reporting bank’s counterparty has not made delivery or payment within five business days after the settlement date, which are the DvP and PvP transactions subject to risk weighting under §.38 of the regulatory capital rules. Positive current exposure is equal to the difference between the transaction value at the agreed settlement price and the current market price of the transaction, if the difference results in a credit exposure of the bank to the counterparty.

For delayed non-DvP/non-PvP transactions,3 also include in column A the current fair value

of the deliverables owed to the bank by the counterparty in those transactions with a normal settlement period in which the reporting bank has delivered cash, securities, commodities, or currencies to its counterparty, but has not received its corresponding deliverables, which are the non-DvP/non-PvP transactions subject to risk weighting under §.38 of the regulatory capital rules.

For further information on the reporting of unsettled transactions, including assigning these exposures to risk-weight categories, refer to the instructions for Schedule RC-R, Part, II, item 22, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

1 DvP transaction means a securities or commodities transaction in which the buyer is obligated to make payment only if the seller has made delivery of the securities or commodities and the seller is obligated to deliver the securities or commodities only if the buyer has made payment. 2 PvP transaction means a foreign exchange transaction in which each counterparty is obligated to make a final transfer of one or more currencies only if the other counterparty has made a final transfer of one or more currencies. 3 Non-DvP/non-PvP transaction means any other delayed or unsettled transaction that does not meet the definition of a DvP or a PvP transaction.

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Part II. (cont.) Memoranda Item No. Caption and Instructions NOTE: Schedule RC-R, Part II, Memorandum items 1 through 3.g, are to be completed semiannually in the June and December reports only. 1 Current credit exposure across all derivative contracts covered by the regulatory

capital rules. Report the total current credit exposure amount when using the current exposure method (CEM) or replacement cost amount when using the standardized approach for counterparty credit risk (SA-CCR) after considering applicable legally enforceable bilateral netting agreements for all derivative contracts that are over-the-counter derivative contracts (as defined in §.2 of the regulatory capital rules) and all derivative contracts that are cleared transactions (as described in §.2 of the regulatory capital rules) and are covered by §.34, §.35, §.132, and §.133 of the regulatory capital rules, as applicable. Banks that are subject to the market risk capital rule should exclude all covered positions subject to that rule, except for foreign exchange derivatives that are outside of the trading account.1 Foreign exchange derivatives that are outside of the trading account and all over-the-counter derivatives continue to have a counterparty credit risk capital charge and, therefore, a current credit exposure amount for these derivatives should be reported in this item.

Include the current credit exposure arising from credit derivative contracts where the bank is

the protection purchaser (beneficiary) and the credit derivative contract is either (a) defined as a covered position under the market risk capital rule or (b) not defined as a covered position under the market risk capital rule and not recognized as a guarantee for regulatory capital purposes. As discussed further below, current credit exposure (sometimes referred to as the replacement cost) is the fair value of a derivative contract when that fair value is positive. The current credit exposure is zero when the fair value is negative or zero. Exclude the positive fair value of derivative contracts that are neither over-the-counter derivative contracts nor derivative contracts that are cleared transactions under §.2 of the regulatory capital rules. Such derivative contracts include written option contracts, including so-called “derivative loan commitments,” i.e., a lender’s commitment to originate a mortgage loan that will be held for resale. Written option contracts that are, in substance, financial guarantees, are discussed below. For “derivative loan commitments,” which are reported as over-the-counter written option contracts in Schedule RC-L, if the fair value of such a commitment is positive and reported as an asset in Schedule RC, item 11, this positive fair value should be reported in the appropriate risk-weight category in Schedule RC-R, Part II, item 8, and not as a component of the current credit exposure to be reported in this item. Purchased options held by the reporting bank that are traded on an exchange are covered by the regulatory capital rules unless such options are subject to a daily variation margin. Variation margin is defined as the gain or loss on open positions, calculated by marking to market at the end of each trading day. Such gain or loss is credited or debited by the clearing house to each clearing member's account, and by members to their customers' accounts.

1 For further information on the market risk capital rule and the meaning of the term “covered position,” refer to the discussion of “Banks That Are Subject to the Market Risk Capital Rule” in the General Instructions for Schedule RC-R, Part II, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports. .

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Part II. (cont.) Memoranda Item No. Caption and Instructions 1 If a written option contract acts as a financial guarantee that does not meet the definition of a (cont.) securitization exposure as described in §.2 of the regulatory capital rules, then for risk-based

capital purposes the notional amount of the option should be included in Schedule RC-R, Part II, item 17, column A, as part of "All other off-balance sheet liabilities." An example of such a contract occurs when the reporting bank writes a put option to a second bank that has a loan to a third party. The strike price would be the equivalent of the par value of the loan. If the credit quality of the loan deteriorates, thereby reducing the value of the loan to the second bank, the reporting bank would be required by the second bank to take the loan onto its books.

Do not include derivative contracts that meet the definition of a securitization exposure as

described in §.2 of the regulatory capital rules; such derivative contracts must be reported in Schedule RC-R, Part II, item 10.

Current credit exposure, when using CEM, or replacement cost, when using SA-CCR, should

be derived as follows: Determine whether a qualifying master netting agreement, as defined in §.2 of the regulatory capital rules, is in place between the reporting bank and a counterparty. If such an agreement is in place, the fair values of all applicable derivative contracts with that counterparty that are included in the netting agreement are netted to a single amount.

Next, for all other derivative contracts covered by the regulatory capital rules that have

positive fair values, the total of the positive fair values is determined. Then, report in this item the sum of (i) the net positive fair values of applicable derivative contracts subject to qualifying master netting agreements and (ii) the total positive fair values of all other contracts covered by the regulatory capital rules for both OTC and centrally cleared contracts. The current credit exposure reported in this item is a component of the credit equivalent amount of derivative contracts that is to be reported in Schedule RC-R, items 20 or 21, column B, depending on whether the contracts are centrally cleared.

2 Notional principal amounts of over-the-counter derivative contracts. Report in the

appropriate subitem and column the notional amount or par value of all over-the-counter (OTC) derivative contracts, including credit derivatives, that are subject to §.34 or §.132 of the regulatory capital rules.1 Such contracts include swaps, forwards, and purchased options. Do not include OTC derivative contracts that meet the definition of a securitization exposure as described in §.2 of the regulatory capital rules; such derivative contracts must be reported in Schedule RC-R, Part II, item 10. Report notional amounts and par values in the column corresponding to the OTC derivative contract's remaining term to maturity from the report date. Remaining maturities are to be reported as (1) one year or less in column A, (2) over one year through five years in column B, or (3) over five years in column C.

Regardless of whether an institution uses the standardized approach for counterparty credit risk (SA-CCR) or the current exposure methodology (CEM) to calculate exposure amounts for its derivative contracts, report in Memorandum items 2.a through 2.g the notional amounts of the contracts, as this term is defined in U.S. generally accepted accounting principles, unless a derivative contract has a multiplier component as discussed in the following paragraph.

1 See the instructions for Schedule RC-R, Part II, item 20, for the definition of an OTC derivative contract.

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Part II. (cont.) Memoranda Item No. Caption and Instructions 2 The notional amount or par value to be reported under SA-CCR and CEM for an OTC (cont.) derivative contract with a multiplier component is the contract's effective notional amount or

par value. (For example, a swap contract with a stated notional amount of $1,000,000 whose terms call for quarterly settlement of the difference between 5 percent and LIBOR multiplied by 10 has an effective notional amount of $10,000,000.)

The notional amount to be reported under SA-CCR and CEM for an amortizing OTC derivative contract is the contract's current (or, if appropriate, effective) notional amount. This notional amount should be reported in the column corresponding to the contract's remaining term to final maturity.

For descriptions of "interest rate derivative contracts," "foreign exchange contracts," “equity

derivative contracts,” "commodity contracts" (including gold and precious metals), and “credit derivative contracts,” refer to the instructions for Schedule SU, item 1.

Exclude from this item the notional amount of OTC written option contracts, including

so-called “derivative loan commitments,” which are not subject to §.34 of the regulatory capital rules.

For information on reporting the remaining maturities of over-the-counter derivative contracts

when using SA-CCR, refer to the instructions for Schedule RC-R, Part II, Memorandum item 2, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

3 Notional principal amounts of centrally cleared derivative contracts. Report in the

appropriate subitem and column the notional amount or par value of all derivative contracts, including credit derivatives, that are cleared transactions (as described in §.2 of the regulatory capital rules) and are subject to §.35 or §.133 of the regulatory capital rules.1 Such centrally cleared derivative contracts include swaps, forwards, and purchased options. Do not include centrally cleared derivative contracts that meet the definition of a securitization exposure as described in §.2 of the regulatory capital rules; such derivative contracts must be reported in Schedule RC-R, Part II, item 10. Report notional amounts and par values in the column corresponding to the centrally cleared derivative contract's remaining term to maturity from the report date. Remaining maturities are to be reported as (1) one year or less in column A, (2) over one year through five years in column B, or (3) over five years in column C.

Regardless of whether an institution uses the standardized approach for counterparty credit

risk (SA-CCR) or the current exposure methodology (CEM) to calculate exposure amounts for its derivative contracts, report in Memorandum items 3.a through 3.g the notional amounts of the contracts, as this term is defined in U.S. generally accepted accounting principles, unless a derivative contract has a multiplier component as discussed in the following paragraph.

The notional amount or par value to be reported under SA-CCR and CEM for a centrally

cleared derivative contract with a multiplier component is the contract's effective notional amount or par value. (For example, a swap contract with a stated notional amount of $1,000,000 whose terms call for quarterly settlement of the difference between 5 percent and LIBOR multiplied by 10 has an effective notional amount of $10,000,000.)

1 See the instructions for Schedule RC-R, Part II, item 21, for the description of derivative contracts that are cleared transactions, referred to hereafter as centrally cleared derivative contracts.

FFIEC 051 RC-R – REGULATORY CAPITAL

FFIEC 051 RC-R-114 RC-R – REGULATORY CAPITAL

(6-20)

Part II. (cont.) Memoranda Item No. Caption and Instructions 3 The notional amount to be reported under SA-CCR and CEM for an amortizing centrally (cont.) cleared derivative contract is the contract's current (or, if appropriate, effective) notional

amount. This notional amount should be reported in the column corresponding to the contract's remaining term to final maturity.

For descriptions of "interest rate derivative contracts," "foreign exchange contracts," “equity

derivative contracts,” "commodity contracts" (including gold and precious metals), and “credit derivative contracts,” refer to the instructions for Schedule SU, item 1.

For information on reporting the remaining maturities of centrally cleared derivative contracts,

including settled-to-market cleared derivatives, when using the SA-CCR, refer to the instructions for Schedule RC-R, Part II, Memorandum item 3, in the instructions for the FFIEC 031 and FFIEC 041 Call Reports.

2.a and Interest rate. Report the remaining maturities of interest rate contracts that are 3.a subject to the regulatory capital rules. 2.b and Foreign exchange rate and gold. Report the remaining maturities of foreign 3.b exchange contracts and the remaining maturities of gold contracts that are subject to the

regulatory capital rules. 2.c and Credit (investment grade reference asset). Report the remaining maturities of 3.c those credit derivative contracts where the reference entity meets the definition of investment

grade as described in §.2 of the regulatory capital rules. 2.d and Credit (non-investment grade reference asset). Report the remaining maturities of 3.d those credit derivative contracts where the reference entity does not meet the definition of

investment grade as described in §.2 of the regulatory capital rules. 2.e and Equity. Report the remaining maturities of equity derivative contracts that are 3.e subject to the regulatory capital rules. 2.f and Precious metals (except gold). Report the remaining maturities of other precious 3.f metals contracts that are subject to the regulatory capital rules. Report all silver, platinum,

and palladium contracts. 2.g and Other. Report the remaining maturities of other derivative contracts that are subject to the 3.g regulatory capital rules. For contracts with multiple exchanges of principal, notional amount

is determined by multiplying the contractual amount by the number of remaining payments (i.e., exchanges of principal) in the derivative contract.

FFIEC 051 SU – SUPPLEMENTAL

FFIEC 051 SU-5 SU – SUPPLEMENTAL

(6-20)

Item No. Caption and Instructions 1 number of years. At defined intervals over the life of the swap, the counterparties (cont.) exchange payments in the different currencies based on specified rates of interest.

When the agreement matures, the principal amounts will be re-exchanged at the same spot rate. The notional amount of a cross-currency interest rate swap is generally the underlying principal amount upon which the exchange is based.

(2) Equity Derivative Contracts. Equity derivative contracts are contracts that have a

return, or a portion of their return, linked to the price of a particular equity or to an index of equity prices. Examples of equity derivative contracts to be reported in Schedule SU, items 1.b and 1.d, include futures contracts committing the reporting institution to purchase or sell equity securities or instruments based on equity indexes such as the Standard and Poor's 500 or the Nikkei.

The amount to be reported as the notional amount for equity derivative contracts is the

quantity, e.g., number of units, of the equity instrument or equity index contracted for purchase or sale multiplied by the contract price of a unit.

(3) Commodity Contracts. Commodity contracts are contracts that have a return, or a

portion of their return, linked to the price of or to an index of precious metals, petroleum, lumber, agricultural products, etc. Examples of commodity contracts to be reported in Schedule SU, items 1.b and 1.d, include futures and forward contracts committing the reporting institution to purchase or sell commodities such as agricultural products (e.g., wheat, coffee), precious metals (e.g., gold, platinum), and non-ferrous metals (e.g., copper, zinc).

The amount to be reported as the notional amount for commodity contracts is the

quantity, e.g., number of units, of the commodity or product contracted for purchase or sale multiplied by the contract price of a unit.

The notional amount to be reported for commodity contracts with multiple exchanges of

principal is the contractual amount multiplied by the number of remaining payments (i.e., exchanges of principal) in the contract.

(4) Credit Derivative Contracts. In general, credit derivatives are arrangements that allow

one party (the “protection purchaser” or "beneficiary") to transfer the credit risk of a "reference asset" or “reference entity” to another party (the “protection seller” or "guarantor"). Report credit derivatives for which the reporting institution is the protection seller as well as those for which the institution is the protection purchaser. Do not net the notional amounts of credit derivatives with third parties on which the reporting institution is the protection purchaser against credit derivatives with third parties on which the reporting institution is the protection seller.

Credit linked notes are cash securities and should not be reported as credit derivatives in

Schedule SU, items 1.b and 1.d. For tranched credit derivative transactions that relate to an index, e.g., the Dow Jones

CDX NA index, report as the notional amount the dollar amount of the tranche upon which the reporting institution’s credit derivative cash flows are based.

Credit derivative contracts to be reported in Schedule SU, items 1.b and 1.d, include: (a) Credit default swaps, which are contracts in which a protection seller or guarantor

(risk taker), for a fee, agrees to reimburse a protection purchaser or beneficiary (risk hedger) for any losses that occur due to a credit event on a particular entity, called the “reference entity.” If there is no credit default event (as defined by the derivative contract), then the protection seller makes no payments to the protection purchaser

FFIEC 051 SU – SUPPLEMENTAL

FFIEC 051 SU-6 SU – SUPPLEMENTAL

(6-20)

Item No. Caption and Instructions 1 and receives only the contractually specified fee. Under standard industry definitions, (cont.) a credit event is normally defined to include bankruptcy, failure to pay, and

restructuring. Other potential credit events include obligation acceleration, obligation default, and repudiation/moratorium.

(b) Total return swaps, which are contracts that transfer the total economic performance

of a reference asset, which includes all associated cash flows, as well as capital appreciation or depreciation. The protection purchaser (beneficiary) receives a floating rate of interest and any depreciation on the reference asset from the protection seller. The protection seller (guarantor) has the opposite profile. The protection seller receives cash flows on the reference asset, plus any appreciation, and it pays any depreciation to the protection purchaser, plus a floating interest rate. A total return swap may terminate upon a default of the reference asset.

(c) Credit options, which are a structure that allows investors to trade or hedge changes

in the credit quality of the reference asset. For example, in a credit spread option, the option writer (protection seller or guarantor) assumes the obligation to purchase or sell the reference asset at a specified “strike” spread level. The option purchaser (protection purchaser or beneficiary) buys the right to sell the reference asset to, or purchase it from, the option writer at the strike spread level.

(d) Any other credit derivatives not considered credit default swaps, total return swaps, or

credit options.

Designation as Held for Trading. As noted above, report each derivative contract according to its designation as held for trading or held for purposes other than trading in items 1.a through 1.d. Derivative contracts held for trading purposes include those used in dealing and other trading activities. Derivative contracts used to hedge trading activities should also be reported as held for trading. Derivative trading activities include (a) regularly dealing in interest rate contracts, foreign exchange contracts, equity derivative contracts, commodity contracts, credit derivative contracts, and any other contract meeting the definition of a “derivative instrument” in, and accounted for in accordance with, ASC Topic 815; (b) acquiring or taking positions in such items principally for the purpose of selling in the near term or otherwise with the intent to resell (or repurchase) in order to profit from short-term price movements; and (c) acquiring or taking positions in such items as accommodations to customers, provided that acquiring or taking such positions meets the definitions of “trading” and “trading purposes” in ASC Topic 815. Derivative positions acquired or taken as accommodations to customers not meeting the definitions of “trading” and “trading purposes” in ASC Topic 815 should be reported as derivatives not held for trading. The reporting institution's trading department may have entered into a derivative contract with another department or business unit within the consolidated institution. If the trading department has also entered into a matching contract with a counterparty outside the consolidated institution, the contract with the outside counterparty should be designated as held for trading or as held for purposes other than trading consistent with the contract's designation for other financial reporting purposes.

1.a Total gross notional amount of interest rate derivatives held for trading. Report the

total notional amount or par value of those interest rate derivative contracts that are held for trading purposes.

1.b Total gross notional amount of all other derivatives held for trading. Report the total

notional amount or par value of all other derivative contracts that are held for trading purposes.

FFIEC 051 NARRATIVE

FFIEC 051 SU-17 NARRATIVE (6-20)

OPTIONAL NARRATIVE STATEMENT CONCERNING THE AMOUNTS REPORTED IN THE

CONSOLIDATED REPORTS OF CONDITION AND INCOME The management of the reporting bank may, if it wishes, submit a brief narrative statement on the amounts reported in the Consolidated Reports of Condition and Income. This optional statement will be made available to the public, along with the publicly available data in the Consolidated Reports of Condition and Income, in response to any request for individual bank report data. However, the information reported in Schedule RI-E, item 2.g, and Schedule RC-C, Part I, Memorandum items 17.a and 17.b, is regarded as confidential and will not be made available to the public on an individual institution basis. BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IDENTIFIED ABOVE, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks choosing not to make a statement may check the "No comment" box and should make no entries of any kind in the space provided for the narrative statement; i.e., DO NOT enter in this space such phrases as "No statement," "Not applicable," "N/A," "No comment," and "None." The optional statement must be entered on the sheet provided by the agencies. The statement should not exceed 100 words. Further, regardless of the number of words, the statement must not exceed 750 characters, including punctuation, indentation, and standard spacing between words and sentences. If any submission should exceed 750 characters, as defined, it will be truncated at 750 characters with no notice to the submitting bank and the truncated statement will appear as the bank's statement both on agency computerized records and in computer-file releases to the public. All information furnished by the bank in the narrative statement must be accurate and not misleading. Appropriate efforts shall be taken by the submitting bank to ensure the statement's accuracy. If, subsequent to the original submission, material changes are submitted for the data reported in the Consolidated Reports of Condition and Income, the existing narrative statement will be deleted from the files, and from disclosure; the bank, at its option, may replace it with a statement appropriate to the amended data. The optional narrative statement will appear in agency records and in release to the public exactly as submitted (or amended as described in the preceding paragraph) by the management of the bank (except for the truncation of statements exceeding the 750-character limit described above). THE STATEMENT WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE REPORTING BANK.

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FFIEC 051 GLOSSARY

FFIEC 051 A-4a GLOSSARY (6-20)

Acquisition, Development, or Construction (ADC) Arrangements: An ADC arrangement is an arrangement in which a bank provides financing for real estate acquisition, development, or

construction purposes and participates in the expected residual profit resulting from the ultimate sale or other use of the property. ADC arrangements should be reported as loans, real estate joint ventures, or direct investments in real estate in accordance with ASC Subtopic 310-10, Receivables – Overall.

12 USC 29 limits the authority of national banks to hold real estate. National banks should review real

estate ADC arrangements carefully for compliance. State member banks are not authorized to invest in real estate except with the prior approval of the Federal Reserve Board under Federal Reserve Regulation H (12 CFR Part 208). In certain states, nonmember banks may invest in real estate.

Under the agencies’ regulatory capital rules, the term high volatility commercial real estate (HVCRE)

exposure is defined, in part, to mean a credit facility that, prior to conversion to permanent financing, finances or has financed the acquisition, development, or construction of real property. (See §.2 of the regulatory capital rules and the instructions for Schedule RC-R, Part II, item 4.b.) Institutions should note that the meaning of the term ADC as used in the definition of HVCRE exposure in the regulatory capital rules differs from the meaning of ADC arrangement for accounting purposes in ASC Subtopic 310-10 as described above in this Glossary entry. For example, an institution’s participation in the expected residual profit from a property is part of the accounting definition of an ADC arrangement, but whether the institution participates in the expected residual profit is not a consideration for purposes of determining whether a credit facility is an HVCRE exposure for regulatory capital purposes. Thus, a loan can be treated as an HVCRE exposure for regulatory capital purposes even though it does not provide for the institution to participate in the property’s expected residual profit.

Agreement Corporation: See "Edge and Agreement corporation." Allowance for Credit Losses: This entry applies to institutions that have adopted ASC Topic 326

(introduced by Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13)). Institutions that have not adopted ASC Topic 326 should continue to refer to the Glossary entry for “allowance for loan and lease losses.” For more information on the allowance for credit losses (ACL), institutions should also refer to the Interagency Policy Statement on Allowances for Credit Losses issued in May 2020.

Standards for accounting for an ACL for financial assets measured at amortized cost and net

investments in leases (hereafter referred to collectively as financial assets measured at amortized cost), as well as certain off-balance sheet credit exposures, are set forth in ASC Subtopic 326-20, Financial Instruments–Credit Losses–Measured at Amortized Cost. For financial assets measured at amortized cost, the ACL is a valuation account that is deducted from, or added to, the amortized cost basis of financial assets to present the net amount expected to be collected over the contractual term of the financial assets.

For institutions that have adopted ASC Topic 326, standards for measuring credit losses on available-

for-sale (AFS) debt securities are set forth in ASC Subtopic 326-30, Financial Instruments—Credit Losses—Available-for-Sale Debt Securities. See the Glossary entry for “securities activities” for guidance on allowances for credit losses on AFS debt securities.

The following sections of this Glossary entry apply to financial assets measured at amortized cost and

also to off-balance sheet credit exposures within the scope of ASC Subtopic 326-20. Measurement – An ACL shall be established upon the origination or acquisition of a financial asset(s)

measured at amortized cost. A separate ACL shall be reported for each type of financial asset measured at amortized cost (e.g., loans and leases held for investment, held-to-maturity (HTM) debt securities, and receivables that relate to repurchase agreements and securities lending agreements) as of the end of each reporting period.

FFIEC 051 GLOSSARY

FFIEC 051 A-4b GLOSSARY (6-20)

Allowance for Credit Losses (cont.): As of the end of each quarter, or more frequently if warranted, each institution must evaluate the

collectability of its financial assets measured at amortized cost, including, if applicable, any recorded accrued interest receivable (i.e., not already reversed or charged off, as applicable), and make adjusting entries to maintain the balance of each of the separate ACLs reported on the balance sheet at an appropriate level.

An institution shall measure expected credit losses on a collective or pool basis when financial assets

share similar risk characteristics. If a financial asset does not share similar risk characteristics with other assets, expected credit losses for that asset should be evaluated individually. Individually evaluated assets should not be included in a collective assessment of expected credit losses. If a financial asset ceases to share similar risk characteristics with other assets in its pool, it should be moved to a different pool with assets sharing similar risk characteristics, if such a pool exists.

ASC Subtopic 326-20 does not require the use of a specific loss estimation method for purposes of

determining ACLs. Various methods may be used to estimate the expected collectibility of financial assets measured at amortized cost, with those methods generally applied consistently over time. The same loss estimation method does not need to be applied to all financial assets. An institution is not precluded from selecting a different method when it determines the method will result in a better estimate of ACLs.

ASC Subtopic 326-20 requires an institution to measure estimated expected credit losses over the

contractual term of its financial assets, considering expected prepayments. Renewals, extensions, and modifications are excluded from the contractual term of a financial asset for purposes of estimating the ACL unless there is a reasonable expectation of executing a troubled debt restructuring or the renewal and extension options are part of the original or modified contract and are not unconditionally cancellable by the institution. If such renewal or extension options are present, an institution must evaluate the likelihood of a borrower exercising those options when determining the contractual term.

In estimating the net amount expected to be collected on financial assets measured at amortized cost,

an institution should consider the effects of past events, current conditions, and reasonable and supportable forecasts on the collectibility of the institution’s financial assets. Under ASC Subtopic 326-20, an institution is required to use relevant forward-looking information and expectations drawn from reasonable and supportable forecasts when estimating expected credit losses.

Expected recoveries, prior to collection, are a component of management’s estimate of the net amount

expected to be collected for a financial asset. Expected recoveries of amounts previously charged off or expected to be charged off that are included in ACLs may not exceed the aggregate amounts previously charged off or expected to be charged off.

Changes in the ACL – Additions to, or reductions of, the ACL to adjust its level to management’s

current estimate of expected credit losses are to be made through charges or credits to the "provision for credit losses on financial assets" (provision) in item 4 of Schedule RI, Income Statement, except for changes to adjust the level of the ACL for off-balance-sheet credit exposures. When available information confirms that specific financial assets measured at amortized cost, or portions thereof, are uncollectible, these amounts should be promptly charged off against the related ACL in the period in which the financial assets are deemed uncollectible. Under no circumstances can expected credit losses on financial assets measured at amortized cost be charged directly to "Retained earnings" after the initial adoption of ASC Topic 326, for which the change from the incurred loss to the current expected credit losses methodology is required to be recorded through a cumulative-effect adjustment to retained earnings. This cumulative-effect adjustment is reported in Schedule RI-A, item 2, “Cumulative effect of changes in accounting principles and corrections of material accounting errors,” and disclosed in Schedule RI-E, item 4.a, “Effect of adoption of current expected credit losses methodology – ASU 2016-13.”

FFIEC 051 GLOSSARY

FFIEC 051 A-88c GLOSSARY (6-20)

Securities Activities (cont.): recognized in other comprehensive income, net of applicable taxes, should be reported in item 10 of

Schedule RI-A, Changes in Bank Equity Capital, and included on the balance sheet in Schedule RC, item 26.b, “Accumulated other comprehensive income.” The amount of other-than-temporary impairment losses on held-to-maturity and available-for-sale debt securities recognized in earnings during the current calendar year-to-date reporting period should be reported in Schedule RI, Memorandum item 14. For a held-to-maturity debt security on which the institution has recognized an other-than-temporary impairment loss related to factors other than credit loss in other comprehensive income, the institution should report the carrying value of the debt security in Schedule RC, item 2.a, and in column A of Schedule RC-B, Securities. Under ASC Topic 320, this carrying value should be the fair value of the held-to-maturity debt security as of the date of the most recently recognized other-than-temporary impairment loss adjusted for subsequent accretion of the impairment loss related to factors other than credit loss.

Impairment of Individual Available-for-Sale Debt Securities (ASC Topic 326) – This section of this

Glossary entry applies to institutions that have adopted ASC Topic 326. Institutions that have not adopted ASC Topic 326 should continue to refer to the “Other-Than-Temporary Impairment (ASC Topic 320)” section above. For additional information on the maintenance of appropriate allowances for credit losses, institutions should refer to the Interagency Policy Statement on Allowances for Credit Losses issued in May 2020.

Standards for the accounting for impairment of available-for-sale debt securities are set forth in

ASC Subtopic 326-30, Financial Instruments–Credit Losses–Available-for-Sale Debt Securities. Under this subtopic, an available-for-sale debt security is impaired if its fair value is less than its amortized cost basis. Thus, as of the end of each quarter, or more frequently if warranted, an institution must determine whether a decline in fair value below the amortized cost basis of an individual available-for-sale debt security has resulted from a credit loss or other factors. Credit losses are calculated individually, rather than collectively, using a discounted cash flow method to compare the present value of the cash flows expected to be collected with the amortized cost basis of the security. An ACL is established, with a charge to the provision for credit losses, to reflect the credit loss component of the decline in fair value below amortized cost. The ACL for an available-for-sale debt security is limited by the amount that the fair value is less than the amortized cost basis, which is referred to as the fair value floor. Noncredit impairment on an available-for-sale debt security that is not required to be recorded through the ACL should be reported, net of applicable income taxes, in Schedule RI-A, item 10, “Other comprehensive income.”

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FFIEC 051 GLOSSARY

FFIEC 051 A-97 GLOSSARY (6-20)

Trade Date and Settlement Date Accounting (cont.): from the asset category in which it was recorded, and the proceeds receivable resulting from the sale

shall be reported in Schedule RC-F, item 6, "All other assets." Any gain or loss resulting from such transaction shall also be recognized on the trade date. On the settlement date, disbursement of the payment or receipt of the proceeds will eliminate the respective "All other liabilities" or "All other assets" entry resulting from the initial recording of the transaction.

Under settlement date accounting, assets purchased are not recorded until settlement date. On the

trade date, no entries are made. Upon receipt of the assets on the settlement date, the asset is reported in the proper asset category and payment is disbursed. The selling bank, on the trade date, would make no entries. On settlement date, the selling bank would reduce the appropriate asset category and reflect the receipt of the payment. Any gain or loss resulting from such transaction would be recognized on the settlement date.

Trading Account: Trading activities typically include (a) regularly underwriting or dealing in securities;

interest rate, foreign exchange rate, commodity, equity, and credit derivative contracts; other financial instruments; and other assets for resale, (b) acquiring or taking positions in such items principally for the purpose of selling in the near term or otherwise with the intent to resell in order to profit from short-term price movements, and (c) acquiring or taking positions in such items as accommodations to customers, provided that acquiring or taking such positions meets the definition of “trading” in ASC Topic 320, Investments–Debt Securities, and ASC Topic 815, Derivatives and Hedging, and the definition of “trading purposes” in ASC Topic 815.

For purposes of the Consolidated Reports of Condition and Income, all debt securities within the scope

of ASC Topic 320, Investments-Debt Securities, that a bank has elected to report at fair value under a fair value option with changes in fair value reported in current earnings should be classified as trading securities. In addition, for purposes of these reports, banks may classify assets (other than debt securities within the scope of ASC Topic 320 for which a fair value option is elected) and liabilities as trading if the bank applies fair value accounting, with changes in fair value reported in current earnings, and manages these assets and liabilities as trading positions, subject to the controls and applicable regulatory guidance related to trading activities. For example, a bank would generally not classify a loan to which it has applied the fair value option as a trading asset unless the bank holds the loan, which it manages as a trading position, for one of the following purposes: (1) for market making activities, including such activities as accumulating loans for sale or securitization; (2) to benefit from actual or expected price movements; or (3) to lock in arbitrage profits.

All trading assets should be segregated from a bank's other assets and reported in Schedule RC,

item 5, "Trading assets." A bank's failure to establish a separate account for assets that are used for trading purposes does not

prevent such assets from being designated as trading for purposes of these reports. For further information, see ASC Topic 320.

All trading account assets should be reported at their fair value as defined by ASC Topic 820, Fair

Value Measurement, with unrealized gains and losses recognized in current income. When a security or other asset is acquired, a bank should determine whether it intends to hold the asset for trading or for investment (e.g., for securities, available-for-sale or held-to-maturity). A bank should not record a newly acquired asset in a suspense account and later determine whether it was acquired for trading or investment purposes. Regardless of how a bank categorizes a newly acquired asset, management should document its decision.

All trading liabilities should be segregated from other transactions and reported in Schedule RC,

item 15, "Trading liabilities." The trading liability account includes the fair value of derivative contracts held for trading that are in loss positions and short positions arising from sales of securities and other assets that the bank does not own. (See the Glossary entry for "short position.") Trading account liabilities should be reported at fair value as defined by ASC Topic 820 with unrealized gains and losses recognized in current income in a manner similar to trading account assets.

FFIEC 051 GLOSSARY

FFIEC 051 A-98 GLOSSARY (6-20)

Trading Account (cont.): Given the nature of the trading account, transfers into or from the trading category should be rare.

Transfers between a trading account and any other account of the bank must be recorded at fair value at the time of the transfer. For a security transferred from the trading category, the unrealized holding gain or loss at the date of the transfer will already have been recognized in earnings and should not be reversed. For a security transferred into the trading category, the unrealized holding gain or loss at the date of the transfer should be recognized in earnings.

Transaction Account: See "deposits." Transactions Between Entities under Common Control: See “business combinations.” Transfers of Financial Assets: The accounting and reporting standards for transfers of financial assets

are set forth in ASC Topic 860, Transfers and Servicing. Banks must follow ASC Topic 860 for purposes of these reports. ASC Topic 860 limits the circumstances in which a financial asset, or a portion of a financial asset, should be derecognized when the transferor has not transferred the entire original financial asset or when the transferor has continuing involvement with the transferred financial asset. ASC Topic 860 also defines a “participating interest” (which is discussed more fully below) and establishes the accounting and reporting standards for loan participations, syndications, and other transfers of portions of financial assets. A summary of these accounting and reporting standards follows. For further information, see ASC Topic 860.

A financial asset is cash, evidence of an ownership interest in another entity, or a contract that conveys

to the bank a contractual right either to receive cash or another financial instrument from another entity or to exchange other financial instruments on potentially favorable terms with another entity. Most of the assets on a bank's balance sheet are financial assets, including balances due from depository institutions, securities, federal funds sold, securities purchased under agreements to resell, loans and lease financing receivables, and interest-only strips receivable.1 However, servicing assets are not financial assets. Financial assets also include financial futures contracts, forward contracts, interest rate swaps, interest rate caps, interest rate floors, and certain option contracts.

A transferor is an entity that transfers a financial asset, an interest in a financial asset, or a group of

financial assets that it controls to another entity. A transferee is an entity that receives a financial asset, an interest in a financial asset, or a group of financial assets from a transferor.

In determining whether a bank has surrendered control over transferred financial assets, the bank must

first consider whether the entity to which the financial assets were transferred would be required to be consolidated by the bank. If it is determined that consolidation would be required by the bank, then the transferred financial assets would not be treated as having been sold in the bank’s Consolidated Reports of Condition and Income even if all of the other provisions listed below are met.2

Determining Whether a Transfer Should be Accounted for as a Sale or a Secured Borrowing – A

transfer of an entire financial asset, a group of entire financial assets, or a participating interest in an entire financial asset in which the transferor surrenders control over those financial assets shall be accounted for as a sale if and only if all of the following conditions are met:

1 ASC Topic 860 defines an interest-only strip receivable as the contractual right to receive some or all of the interest due on a bond, mortgage loan, collateralized mortgage obligation, or other interest-bearing financial asset. 2 The requirements in ASC Subtopic 810-10, Consolidation – Overall, should be applied to determine when a variable interest entity should be consolidated. For further information, refer to the Glossary entry for “variable interest entity.”